Vitaliy Katsenelson is Chief Investment Officer at Investment Management Associates in Denver, Colo. He is the author of Active Value Investing (Wiley, 2007) and the upcoming The Little Book of Sideways Markets (Wiley, December 2010).
Posted on 07/19/2012 3:36:24 PM PDT by SeekAndFind
I sang love serenades to Microsoft in the December issue, but a few weeks ago we sold our shares of Microsoft. Because we believe the stock is undervalued, that decision was not easy. What changed? A very important part of my thesis was the success of Windows 8, an operating system that Microsoft made for both PCs and tablets. When I saw Windows 8 demonstrated in early 2011, it looked like a very innovative, un-Microsoft-like product. Windows 8 was very important for Microsoft's response to Apple's iPad --- a tablet that was deservingly stealing market share from low-end laptops. Windows 8 was supposed to take Microsoft to the next level, leapfrogging Apple and Google.
A few months ago Microsoft released the public Windows 8 beta, and I tested it out. To my shock, I found it to be a very confusing product. The interface was slick and visually very appealing, but I simply could not figure out how to use it. All the experience I had accumulated using Windows over the past two decades was useless with Windows 8, and the fact that Microsoft took out the Start button did not help, either. I found myself staring at the screen helplessly, clicking the mouse on different corners, trying to discover how to do basic tasks that we normally take for granted, like starting a program or running two programs side by side. Even figuring out how to shut down the computer was an ordeal.
After a while our frustration built up to the point where I wanted to curse and scream obscenities at Microsoft and its CEO. I decided, however, to wait. Windows 8 had just been released for consumer preview; it was in beta, not a final product. I thought Microsoft could not possibly release a product that was so important to its future but so obviously confusing. To be honest, I simply could not process the situation; I thought maybe it was me; maybe I’m lacking the Windows 8 gene in our DNA. However, in May I read several professional reviews that confirmed our worst fears: the Windows 8 I had used was the product Microsoft would ship (less a few bugs). And I was not the only one with that deficient Windows 8 gene. As John Dvorak of MarketWatch put it, “The real problem is that it is both unusable and annoying. It makes your teeth itch as you keep asking, “Why are they doing this!?”
I know why. Microsoft wanted the same version of Windows to work on both a PC that is controlled with a mouse and a tablet controlled by touch. Microsoft had learned from past mistakes and had stopped trying blindly to port Windows made for PCs to tablets and mobile phones. Instead, it took the Metro interface it created for mobile phones and ported it to tablets and PCs. Though this strategy should work for tablets — after all, tablets are just supersized mobile phones — it fails miserably when you port it to PCs. But that is what Microsoft did. The touch gestures that work well and are intuitive on tablets and mobile phones fall flat when you try them on a PC with a mouse — swiping, a very natural touch gesture, is simply cumbersome with a mouse.
Microsoft’s ambition was to make tablets running Windows 8 as powerful as your average Windows PC. Tablets, to date, have been great at receiving information (reading, watching movies) but weak at creating content. When I travel I still have to bring along a laptop and a tablet. Microsoft wanted to make a tablet that was good at both receiving and creating content. This could have given Microsoft a significant leg up on the iPad, which is terrific for consuming information but still limited when it comes to productivity. I don’t have a view on how good Windows 8 is for tablets, but I think that Windows 8 for PCs turns PCs into productivity-reducing tools; and I think this unfortunate OS is going to be bad for MSFT.
He sold stock because he can’t operate a computer ??
He sold stock because he can’t operate a computer ??
Starts off by saying he sold it, because it was undervalued and windows 8 was doing well. I guess he's waiting for the price to go up to what he thinks it ought to be before he buys any again.
No, he sold stock because he thinks Windows 8 is going to fail miserably.
How Real People Will Use Windows 8 - YouTube
http://www.youtube.com/watch?v=v4boTbv9_nU
No, he sold is Microsoft stock because he believes that the Windows 8 metro interface is unusable and that consumers and corporate purchasers will refuse to adopt the software... keeping their Win7 computers another couple of years, or adopting a tablet instead of a laptop, etc.
I’ve heard the same thing from a number of very savvy computer users. Think about what would happen if computers did not come with QWERTY keyboards. How would you fee about buying that new computer.
Maybe MS rehired the team that produced Microsoft Bob.
No - he sold stock because he perceived that MSFT, in trying to catch the cool and sexy tablet PC market (which has been Apple's turf) has created software that will be a disaster for it's core user group - business users in the laptop/desktop market. This will be worse than the Vista disaster, because I understand there are special hardware requirements for desktops to run Windows 8. If the O/S is not appealing to desktop users, they will delay purchasing new computers equipped for and pre-loaded with Windows 8, and some manufacturers are going to have very bad years. Not to mention MSFT. The iPad kids are true believers - they view MSFT much as we view Obama. A new O/S is not going to get them to dump Apple. So MSFT is alienating it's base while gaining an insignificant market share in the tablet market.
RE: I guess he’s waiting for the price to go up to what he thinks it ought to be before he buys any again.
WHAT ??? This is BUY HIGH SELL LOW... Who are the fools who would want him to manage their investments?
Unless they believe they can crush the PC instead. Hello, Linux...
I have heard Windows 8 referred to as “Windows 808”.
In addition to the ridiculous “Microsoft BOB”, there is also a joke that a computer error of “808” means that “I looked for your file twice (404) and still didn’t find it.”
I have tried the release preview and find it abysmal. Metro may well be great on a tablet but it is obscene to force desktop users to use it. The “full screen” app is moronic on a big screen that allows many programs to be open at once. Additionally, touch gestures are useless on current desktop hardware. I’m not sure, other than being fashionable, what use they might have on desktop hardware enabled for touch. Holding one’s hands out and swiping over the surface of a vertically oriented monitor seems a bad ergonomic solution.
Microsoft want the developers to actively target Metro. Will an emphasis on writing to Metro cause a least common denominator effect, and lead to the dumbing down of programs so that an app will run on a tablet and a desktop?
As much as I like Win 7, I hate this product. Depressingly, there is a similar trend in the desktop UI’s of Apple and Linux.
“This will be worse than the Vista disaster, because I understand there are special hardware requirements for desktops to run Windows 8.”
This could be the time when desktop Linux finally gets a shot at some exposure. If corporate users can’t run Windows 8 on their current hardware — but CAN run Linux — that may convince many companies to switch.
One of the big things keeping Linux off the home desktop has been the lack of games. Valve just announced its intention to release a Steam client for Linux and started a Valve Linux blog: http://blogs.valvesoftware.com/linux/
Other game makers will now have to do the same in order to compete.
What is it with Microsoft and these Fisher-Price colors? Has that been photoshopped or is that the real thing?
If that keyboard was white or black it would look cool. But that blue... UGLY!
At some point not too far away I'll most likely buy an Apple computer, regardless of what MS does with 8 or some future 'fix' that lets users have a more intuitive interface that is at least somewhat similar to what people are most familiar with.
“Depressingly, there is a similar trend in the desktop UI’s of Apple and Linux.”
True, but with Linux we’ll always have a choice. There will always be alternate desktops and the makers can’t force a choice upon us. Microsoft and Apple can and do.
But, the biggest problem with Linux is the software that will run on it, and that which will not - which includes most business software people in the US are most familiar with.
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