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Microsoft business can collapse?


shalab
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Why buy Microsoft when you can buy something as dominant, as cheap, and it will be around for the next fifty years...Walmart!  I would not be surprised to see Berkshire take another big chunk in this company at current prices.  Cheers!

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Why buy Microsoft when you can buy something as dominant, as cheap, and it will be around for the next fifty years...Walmart!  I would not be surprised to see Berkshire take another big chunk in this company at current prices.  Cheers!

 

Agreed.  There are plenty of large caps trading at similar multiples to MSFT that face much lower execution risk.  You mentioned WMT, we've discussed JNJ in the past, and even WAG has nicely plummeted if you like the pharma-retail space.  There are plenty of good values out there, but not that many astounding values.

 

SJ

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Why buy Microsoft when you can buy something as dominant, as cheap, and it will be around for the next fifty years...Walmart!  I would not be surprised to see Berkshire take another big chunk in this company at current prices.  Cheers!

 

Not that I'd buy Microsoft, but frankly I wouldn't buy Wal Mart either.  They've not really had any success internationally, margins are extremely thin, competition is fierce...it wouldn't take very long with lackluster management for Wal Mart to start looking a lot more like Kmart.

 

Microsoft's moat (and profit margins, for that matter) is much, much larger in my view, even though it is deteriorating.

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Microsoft is probably going to go the way of IBM. Its consumer lines will gradually be eroded by Google and Apple to the point where they abandon them and then retrench to make software for the enterprise/business segment.

 

For an investor, this obviously presents an issue - I would guess that over the next 10 years FCF will decline, so I think it will be a mistake to not handicap for that when you do your analysis.

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Why buy Microsoft when you can buy something as dominant, as cheap, and it will be around for the next fifty years...Walmart!  I would not be surprised to see Berkshire take another big chunk in this company at current prices.  Cheers!

 

Nice.  I haven't been looking at WMT in quite a long time.  I hope it will go to the lows it made several times in the past 10 years: $43/share.  I will snatch up a cargo container load. 

 

Technology is a quandary.  Unless you've grown up with it and work in it, it's very difficult to determine future trends.  Hardly anyone predicted Apple's stellar rise.  No one predicted IBM's resurgence.  Likewise, in 2000, no one would ever have thought that the most dominant UNIX vendor, Sun, would eventually head towards collapse--essentially, if Oracle didn't buy them out, they would have.  I don't know where Microsoft will be in 10 years, no one does, but the risk of becoming the next Sun is real and probable.  I would not be surprised that by 2030, Google's Android will become a dominant force in the consumer OS market. 

 

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Even if you have grown up with it, you don't necessarily understand it.  Look at IBM and the PC's.  I remember when the IBM guys came by and they were shocked at what we were doing with the Osborn PC.  You needed a big mainframe to do all that stuff and then not that easily. :-)

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<i> Not that I'd buy Microsoft, but frankly I wouldn't buy Wal Mart either.  They've not really had any success internationally, margins are extremely thin, competition is fierce...it wouldn't take very long with lackluster management for Wal Mart to start looking a lot more like Kmart. </i>

 

Walmart has 25 billion dollar/quarter business internationally which is growing 25% YoY. 100 billion/year business internationally with huge presence in Canada, Mexico, Brazil and growing presence in China. The margins are stable or are increasing. The current weakness in WMT is because of Yuan appreciation.

 

Seems like my knowledge of the international situation is somewhat dated.  However, I still don't think that an idiot can run that business for long without significant negative consequences.

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Why buy Microsoft when you can buy something as dominant, as cheap, and it will be around for the next fifty years...Walmart!  I would not be surprised to see Berkshire take another big chunk in this company at current prices.  Cheers!

 

I don't know if I'd bet on Wal-Mart being around for the next 50 years either as a sure thing.  Retailers seem to have a short shelf-life (no pun intended).

 

Now, I do own stock in Wal-Mart (because I think its cheap), I'm just providing the devil's-advocate case here - Wal-Mart is not without risk.  The history of retailers in the US is littered with defunct companies; Wikipedia even has a page devoted to defuct US retailers, subdivided by niche:

 

http://en.wikipedia.org/wiki/Category:Defunct_retail_companies_of_the_United_States

 

Consumer preferences seem to change faster than most retailers have historically been able to adapt to.  I don't think there is a "Coca-Cola" of retailing; an enduring brand with value.  I believe Wal-Mart is a good value at this point, but I also think there is a fairly decent chance that another company will surpass it as the "dominant" US retailer within the next 50 years.

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As a follow up, this is just anecdotal evidence, but Good to Great identifies 3 retailers among its "good to great" list: Krogers, Walgreens, and Circuit City.  In the relatively short time since this book was published (less than a decade), one of these supposedly "great" companies, selected among thousands screened, is now defunct (Circuit City).

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I don't know if I'd bet on Wal-Mart being around for the next 50 years either as a sure thing.  Retailers seem to have a short shelf-life (no pun intended).

 

I don't think anyone was saying Walmart will be as dominant in 50 years.  Just that they should be around in 50 years.  Take a look at JC Penny's (1902), Nordstrom's (1901), Sears (1899), Macys (1820) & Hudson's Bay Company (1670).  Their market share has withered with age and shopping preferences but they are still around.  

 

If you are projecting out cash flows, you can probably project out with some certainty that Walmart will be around in a fairly significant position 30 years from now.  I'm not sure you can do that with Microsoft or most other retailers, including companies like Amazon.com.  McDonald's will be selling more burgers thirty years from now...Coke will be selling more pop...and Walmart will be selling more merchandise.  Why?  Because of their dominant distribution system.  Krogers, Circuit City and Walgreen's may have had good management, but they do not have dominant distribution channels.   Cheers!

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Sure, and I own WMT and think it represents a good value.  I'm certainly not trying to dispute that the odds are WMT will remain dominant, and its management and distribution system will allow it to outperform relative to its competitors (and even if it doesn't there is a good margin for safety built into the stock).

 

However, I would argue that a company like WMT has a higher level of risk than KO or MCD.  As for JCP, JWN (which I also own), SHLD, M, and Hudsons, I would argue that these are the exception to the rule (though I am no expert in the retailing space, and this is merely my opinion).  I think the risk is that WMT turns into the A&E of the 21st century.  

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