updated 03:10 pm EDT, Thu July 16, 2009
Analyst Says Sell MS Stock
In a rare move, Argus Research analyst Jackson Turner today reversed his recommendations and urged investors to sell Microsoft stock. He cautions that the market has "shrugged off" real threats to its operating system business and that neither investors nor Microsoft have fully realized that the iPhone, as well as Google platforms like Android and Chrome OS, are shrinking Microsoft's influence. Some effects may not be felt until later in 2010, when Chrome OS is released, but Microsoft now faces a slow "ebbing tide" over the next few years as it loses share.
"We believe Microsoft has misjudged -- or more judiciously, has been unable to react swiftly to -- the shift towards simpler operating systems on cheaper, more portable devices, including cell phones, smart phones and netbooks," Turner said.
The analyst softens his estimates by reassuring investors that Microsoft will still be healthy for the foreseeable future, even if trends are likely to run against the company in the long term.
A call to sell Microsoft stock is extremely rare for the industry. Outside of the economic crash, the company's stock has been largely unchanged for the past decade as its monopoly of operating systems has gone without a major challenge. However, the company is now poised to have its yearly smartphone share eclipsed by Apple and faces stiff competition from Android, which follows Microsoft's strategy of embracing many manufacturers but is less expensive or even free to license and is much adept at touch. Chrome OS threatens to undermine Microsoft's dominance of netbooks, where again the Google software should be less expensive.
By comparison, Windows Mobile remains on the same basic foundations of Windows Mobile 5 in 2005 and also shares some roots with Windows CE in 2002; a fully modern, touch-native version isn't expected until the launch of Windows Mobile 7 early next year. Microsoft's existing control of netbooks has also been helped by underpricing Windows XP and keeping it on sale both to give netbooks a sufficiently fast version of Windows and to fend off Linux, which will return with the release of Chrome OS.