A Sale on the Zune Could Spell Trouble for Microsoft
In today's (Sunday) Ads, a noticeable price in the MP3 section can be found. The price for the reasonably new Microsoft Zune has dropped to incredibly low levels, relative to its competitor's product, the Apple iPod. Originally released at an MSRP of $249.99, the new price is at $199.99, a clear savings of $50. The new price drop could spell out one of two things.
The Zune could currently be suffering from the competition between the iPod market share. The iPod still has a great hold on the market, and an incredible ease of use associated with connecting to Macs or Windows through iTunes. The Zune on the other hand doesn't offer dual-platform universality and tends to be lumped with the Microsoft stereotype of flawed products, which have been heavily associated with the introduction of Apple's Ads featuring Mac and PC. The duet consistently features the two talking about the differences and the business only attitude of the Windows platform. Ultimately, the current negative sentiment behind the Windows system may be hindering profits and sales revenue from the Zune.
The other consideration may be a new Zune product in the near future. For some time, Microsoft has been rumored to be working on an upgraded Zune or a Zune phone. However, the plans for an upgrade or phone are still unconfirmed by Microsoft. If product inventories begin to decline, it may be a sign that a new product is on its way, and a new era for Microsoft products.
Despite the possibility of declining sales and revenue for the Microsoft Zune, it's hard to deny the interesting and futuristic technology currently being used. A competitive 30 GB hard drive, wireless sharing capabilities (despite being limited by record labels), 3-inch screen, and a built in FM-Radio. All of which, except for the hard drive capacity, are unmistakably absent from the Apple iPod. The future of the Zune is somewhat up in the air, but with the success of the Xbox, and the understanding that it takes quite a bit of advertising and time for the success of a new product, we could see a continued push for the Zune by Microsoft. Until then, wait on any purchases of MSFT. It's too big of a gamble, and in a previous article I wrote, I mentioned how much of a strain Steve Ballmer is putting on Microsoft stock.
Ballmer’s Insanity and Microsoft Stock
Steve Ballmer, CEO of Microsoft (MSFT), may be digging himself a grave. If he isn't replaced within the next year, I think it will seriously be time to reconsider Microsoft's business strategy and reasonable reasons to invest in the stock.
When sizing up any stock, there are a number of factors to take into account. With a large, well-known company like Microsoft many of the fundamentals and reasons to invest in the stock are found quite easily. On the positive side, Microsoft is and has been releasing a wealth of new products, along with recognized increases in revenue. Office, Vista, and the Xbox 360 have all taken part in the recent increases in MSFT (Recent price: 27.33). The interesting part is taking into account the negatives. For starters, Microsoft stock is definitely overpriced at a 23 P/E ratio. The stock is flat over six months, with a high in the stock price in January 07. Unfortunately, at the root of some trouble in the stock may be Microsoft's very own CEO.
Ballmer became the CEO for Microsoft in January 2000. Since then, Microsoft has been on a bumpy road, and consistently falling under the pressure of Wall Street and fellow competitors. For instance, in Apple Inc's (AAPL) latest quarter, revenue showed a steady and commanding increase in product sales and market share. A confidence boosting number for Apple, but a warning sign for Microsoft. The reaction to this and many other issues is what's so alarming. Instead of saying nothing at all, or admitting that a competitor has a great product, he passes it off like it's nothing.
In some recent news and video with Ballmer, interviewers are seeing some of the most humorous and childish ways of answering questions. A recent interview caught Ballmer laughing hysterically at the idea of the iPhone. The idea that the phone starts a $400 and goes up to $500 was just to humorous for him to reasonably answer the question. The fact is that all new products have a high starting point, Ballmer should know this with Vista Ultimate, which sells for about $400. As the phone captures greater market share, prices should begin to go down, and flexibility with phone plans should soon follow. Look below for the Ballmer Video.
A recent news article, by Ina Fried, entitled "Ballmer calls Google's growth plan 'insane'," captures Ballmer's incredibly unintelligent business sense and public speaking abilities. Ballmer's vocabulary never ceases to amaze, as his phrases like, "Google is a one-trick pony," "They do a lot of cute things," "They are trying to double in a year, that's insane in my opinion," and in acknowledging Google's current success, "That was the '90s for us...or I would say the '80s and '90s." At first the quotes may seem to be true insults to Google as a company and its business model, but dig deeper, and a much scarier notion evolves. Microsoft is stuck in the past, continuing to create the same products that they always have, and refusing to make the necessary changes to broaden their technological innovations. Video of Ballmer from the Stanford Graduate School of Business can be found on CNET at: http://news.com.com/1606-2-6167775.html.
If Microsoft continues to harbor such a negative and inarticulate CEO, their stock and business will continue to suffer. Ballmer is bad news for Microsoft, and he needs to be taken down from his position as CEO. Understanding that upper management and executives play such a large role in the price of a stock is something that is overlooked far too often. The winners in the investing game know, before investing, always try to investigate and study up on the influential people in the company, and understand their possible effects on the stock price.
Disclosure: Long Apple Inc. (AAPL)