Tech Trends: Microsoft looks strong
Remember when operating systems had quaint, logical names like Windows 98 or technical names like Windows XP? Now it's all about making a connection to users. Apple has Jaguar and Tiger. And Microsoft has now announced it is naming the next version of its flagship operating system Windows Vista. The first beta version of Windows Vista, which had been code-named Longhorn, will be released to developers next week. It is scheduled to be available to the public in 2006.
The news came a day after Microsoft's quarterly earnings announcement last week, which left investors largely unfazed. Net income rose 38 percent during its fiscal fourth quarter over the same period last year, to $3.7 billion. A host of one-time items, including legal fees for antitrust-related litigation and a windfall of tax benefits, muddied the bottom line. Excluding those items, Microsoft's earnings of 32 cents per share beat analyst expectations by a penny. Driven by strong software and server sales, revenues were $10.1 billion.
Microsoft executives reiterated a positive outlook and said sales of its video game console Xbox helped drive up revenues in its home entertainment division. A new version of Xbox will be released later this year. Analyst Drew Brosseau at SG Cowen is encouraged by Microsoft's anticipated product releases this year and next, and he sees potential for its stock price to rise up to 20 percent over the next six to 12 months. "Microsoft continues to benefit from healthy PC unit and server demand, market share gains in the enterprise, and its exposure to high-growth consumer markets," Brosseau wrote.
Indeed, PC shipments worldwide increased 14.8 percent during the quarter ended in June, according to research firm Gartner.
But Microsoft investors appear to be waiting on the sidelines, as the positive earnings announcement failed to lift the stock. Vista will be Microsoft's first new operating system in five years, a longer period than between any other releases since the first version came to market in 1985.
And some see increased competition from upstarts like Google becoming more of a problem for Microsoft in the future. That rivalry is already starting to play out in the courts. Microsoft sued Google and one of its employees, a former Microsoft engineer, last week, alleging breach of a non-compete agreement. Not to be outdone, Google had countersued by week's end.
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