Windows 8 has launched. And if Microsoft Corp.'s share price is any indication, investors aren't buying the hype: In early afternoon trading, shares were up about 6 cents (U.S.) or 0.2 per cent.
Yet, the slight move probably has little to do with the new operating system, unveiled in a splashy event in New York and covered by tech journalists with the level of enthusiasm normally reserved for Apple launches. But the shrugs reflect both Microsoft's gift and curse.
The curse: No one cares about this launch, or any Microsoft launch for that matter. Skepticism about Microsoft runs far and deep, exemplified by an excellent article today by my colleague David Milstead, who wrote: "In what, please tell me, has Microsoft been ahead of the curve in the last, oh, I don't know, 30 years? The company's only new-product offering that has worked is the Xbox...."
And even that product merely followed previous innovations by Sony with its PlayStation gaming consoles. The short of it is that Microsoft – long, long ago – lost any pretense to being on the cutting edge of technology.
That helps explain why the shares trade at just 9.6-times estimated earnings and the share price remains 50 per cent below its 1999 high – even though earnings on a per-share basis have risen about 40 per cent since then.
But is Microsoft a write-off? Probably not, and that's the company's gift: It doesn't matter much what Microsoft gets right and what it gets wrong, because its captive market – especially in the corporate world – is massive and sales tend to flow with the economic cycle rather than hype over its latest product.
Last year alone, Microsoft sold $18-billion worth of Windows operating systems, pocketing $11.5-billion as profit.
That might overstate things a bit. If Microsoft's operating systems flopped and everyone migrated to competing systems, it would be in trouble. As well, sales of personal computers worldwide are in decline as more people migrate to tablets and smart phones, where other operating systems can be used.
But still, Microsoft is going to sell a lot of operating systems – and one of the primary determinants is how fast companies upgrade their technology. During bad times for the economy, business spending can be sluggish. During better times, or when corporate technology is getting too old to be effective, spending picks up.
The market is cautious on the global economy right now, given the recession in Europe, the slowdown in China and stubbornly high unemployment in the United States, which is probably why Microsoft shares are failing to get any traction after its Windows 8 launch on Thursday.
Does that make Microsoft a stock to avoid? No way: It's a good stock for betting on better economic days ahead.