goldfinger

I left the boat yesterday and reallocated in other stocks.

Margins are actually moving up and they are giving up the low margin part of the business progressively. That's what the market doesn't like because of the revenue part but profitability is increasing very quickly.

I don't think it's limited to members here. You don't need to spend much time to figure out favorable risk/reward scenario if they come within your circle of competence. Some people might not want to own these companies rigth now due to finding better risk/reward deals but these companies are very good risk/reward option going forward. I don't think GOOG is that cheap but they might make up for it with their very wide moat. HPQ's price is completely ridiculous at this point: price to FCF at 5 to 6 max with 16B buyback program and 13B cash on the balance sheet and borrowing costs so low for HP. The market cap is 65B meaning they could increase ownership by 1/3 while we wait. With Andreesen at the board some of it may happen in short order. It has strong franchises and is actually gaining ground in networking and software/services. It already has almost all resources and technologies to offer strong cloud solutions (WebOS is part of it and the press forgets to speak about ALL the technologies that they got access to by buying Palm - storage, data center, webos => ecosystem cloud included). There are headwinds too like government spending but the PC business is more robust than what the market is discounting. Last time I went to best buys (yesterday) people were looking at laptops and HP tablets after the 100 rebate was applied! This market is a joke sometimes.

Please do not apologize Sanjeev. I am just very happy everything is back to normal! Thanks a lot! ;)

He's definitely right on financials. I think he's 85% right on BAC. And yes, it's not his fault that people pull their money, but unfortunately it comes with the territory when you run a mutual fund or a fund with no lockup. Cheers! What do you mean by 85% right Sanjeev?

Buffett agrees with you: >:( http://www.foxbusiness.com/markets/2011/08/05/buffett-to-fbn-sp-downgrade-doesnt-make-sense/

I am selling some tech like MSFT to buy BAC, MBI and AIG common (still have a sizable position in MSFT). It reminds me a bit of 2008: raising cash levels in the short term by investing in some companies that the market doesn't hate too much and that are very obviously undervalued and buying more undervalued ones. Hopefully those will prove good moves in the long run... ::)

I always enjoy knowing that I am on the same side of the trade(s) as you! ;D

Good numbers. Stock down -0.79 right now though. After hour trading is very light. Not sure it is representative of anything really!

In between Bing - Facebook - Yahoo, Skype + Comcast, Mango, Office 365 and other projects, I would say that Google and MSFT are in a war of many fronts!

Same here. I have a new laptop and I had access to free office. Now because of legacy (people send me documents) and because of my own needs I am going to by the subscription...

That's not what I said. XBOX is quite good, but SONY also dropped the ball somewhat in the same period, so the comparison between XBOX and Playstation isn't the same as Google Search and Bing, because Google isn't going the way of Sony right now. When your competitors shoot themselves in the foot, that has to be taken into account in the calculations... XBox is where Microsoft intends to conquer the home entertainment business and more (Web TV is not being used by people who bought it). Beyond the Skype + Comcast deal, they are now talking of introducing interactive advertising in games and other programs running on XBox (and Microsoft doesn't know how to innovate)! Kinect is the fastest selling device in history. People who own other consoles (PS3, Wii) are buying XBox. Young people learn about Microsoft through the XBox and they do not come with former generations' hatred for this company. Kinect UI concepts are going to be made available in SDKs and subsequent versions of Windows OS. That along with the PC's natural design evolutions (tablet like, ultra thin, ultra powerful, access to all common devices, etc...) will make Windows machines super competitive especially with advanced COMM services on them. Bing, Speech Recognition and other technologies of that type are aggregated horizontally to increase the offering. ETC... Microsoft is competing hard these days and there will be more clarity when the current pipeline is deployed.

Again Einhorn has not been too impressive lately. And Tilson may want to go find easier short ideas...

I think making better meant: integration and milking. Dos, Windows, Excel, Word, Outlook, IE, SQLServer, XBbox, Sharepoint and many many other products are examples of that. Frankly I would stay away from that kind of thinking (even though he may be replaced tomorrow which I doubt). I know everybody says Balmer is a dumb ass, Einhorn included and by the way I heard the same about Bill Gates from lots people in the past too. I have heard Balmer talk on other occasions and it was obvious he was thinking long term in many areas of his business. For now MSFT earnings have tripled in 10 years and the strongest pipeline ever is coming to market. Lots of investments and moves will get much clearer within the next 2 to 3 years at Microsoft. Convergence possibilities are very impressive if you really thing about it.

BINGO!!!!!!!!!!!! ;D ;) :D

Bingo, you are not alone! ;D

Munger would you mind giving more details on where exactly those businesses are in big trouble?

DELL has $2.20 per share non-GAAP forward earnings if the latest quarterly numbers are to be maintained. That's I think where DELL is much cheaper than MSFT and CSCO. Time will tell. They are expecting 5% to 7% revenue growth with rapidly increasing operating margins for the foreseeable future. And Dell has put his money where his mouth is even though he invests most of his money in a proprietary diversified hedge fund. So I believe some of what they say.

Sure totally. But for MSFT the price is cheap, the pipeline very strong and moats still exist. Moreover MSFT is attacking new markets that have already been defined by the competition and may be able to put its existing weight in the balance along with partnerships to get to critical mass (which it already has done successfully a few times). So without being overly optimistic, we are paying little for a story that is only waiting for a more realistic valuation.

You went into the details and I like your explanations. The analogy with IBM is effectively very good and Dell's niche is the smaller business. Thanks TxLaw.

LOL - that's one way to look at it! Another way to look at it is to say that Dell is just retooling their competitive advantage as lowest-cost-provider on the PC side. The old model was that they could assemble your exact PC requirements and ship it to you at a lower cost than their competitors. Now that hardware pricing is converging, the incremental cost savings of 200GB HD vs. 250GB HD aren't significant relative to the cost of providing all of those options. So they're consolidating models because it's less expensive to supply 1,000,000 PCs with 12 variations vs. 1,000,000 PCs with 5,000 variations. But yeah, the advantage they enjoy with their world-beating supply chain is being marginalized. Again, on the PC side only. Dell's business is changing fast and what you describe is the past. Almost half of Dell employees work in services now! Dell is opening offices in the Silicon Valley so as to augment its software solutions while optimizing its low margin businesses by outsourcing opportunistically. The build to order model is now only one smaller part of the offering. This is definitely not a business with super strong moats and coke like franchises but its strength comes from multiple advantages combined together: - a brand name and a resilient reputation for selling good low cost hardware. - super efficient distribution channels. - very good understanding of customer needs (a la WalMart). - positioning to serve smaller structures (HP and IBM are competing in the large scale areas - large institutions). - completeness and relevance of the offering: combination of hardware/software-security/services/cloud/storage + partnerships (for network offering with Cisco for example). - relevance of the old model for servers and appliances and network and still for PCs in certain cases. - marketing and presence. - scale. People who play with hardware like you are a minority and do not represent the mass. Enterprises do not have time to play like this and they are looking for certain combinations of features. As a reference: http://bits.blogs.nytimes.com/2011/05/02/dells-future-beyond-the-pc-business/

Ben Graham I just listen to the mp3 and I could not agree more with them. Thank you, that was a pleasure to listen to their case.

Dell's ability to serve mid to small businesses or specific teams within an organization is one big part of its moat. Many IT people directly go to Dell to order their next machines and do not think twice about it (servers, laptops, appliances etc...). They can adjust their needs through Dell's web site and order. Extremely practical, it almost has become a conditioned reflex to go see what they have to offer when new hardware is needed. As far as I know this model has not been fully replicated by others. Michael Dell has complemented this offering with additional services of higher value and margins and I think that actually reinforced this area. Himself said recently that competitors cannot serve mid to small businesses as well as they do. In many cases it is still true. They invested and are investing in cloud, storage, security, software and services. They can complement their offerings with the new kinds of devices, I do not see this area as disruptive and demands for PCs and servers will continue to grow. Margins are improving, the distribution chain has gone through a recent cycle of cost cutting and optimization, I do not think it is that easy to replicate their distribution channels. So IMHO it is a combination of brand name - good low cost hardware, low cost on demand distribution channels, completeness of the offering and customization capabilities. This has not been replicated by anyone up to now.

I agree also. And you know Microsoft has an history of coming next but invading the market with an approach that works business-wise once the market has pretty much been created by others or so. I mean look at Xbox, Windows and Office (Excel and Word and even Sharepoint! for example). Microsoft might end up being the one that really puts RIMM in a very tough position as they will compete in the enterprise business and Microsoft will do what it has done before to build a moat: have all the important features, applications and bundles that make them more enticing if not a must-have in many situations.

Kinect technology will be used to get there: http://seattletimes.nwsource.com/html/businesstechnology/2015343377_microsoftkinect17.html. I also saw some demos of Microsoft research in terms of user interface for the future and it is really cool. Microsoft's pipeline is really very rich right now and it covers all areas where Microsoft has to meet competition. I cannot wait to not only see it deployed but also to find out all cross-applications that they will create and push from all this (like the Comcast + Skype deal).