"Operating income decreased, which is disappointing, but fell as
the result of higher operating expenses, mainly in research and
development and sales and marketing. Microsoft's operating margins
fell to 47.9% from 51.8% a year ago, and margins may very well
shrink as the company faces tougher competition from Linux and the
"Analysts are focused on PC demand in the coming quarters, since
it's a useful gauge of short-term expectations. We're not. Over the
long term, the number of PCs in use will grow. We're interested in
following up on these issues:
What the heck is Microsoft's "bet the company" initiative,
.Net? I vaguely understand it's a software platform that would
allow Microsoft's applications to function on any device, but I
have no idea whether there is an actual product that can do this or
what incentive customers truly have to implement it. At this point,
I wouldn't pay a dime for a piece of those future cash flows, yet
it's an important part of the company's strategy.
What kind of threat does the Windows server platform face
from Linux? With Linux growing hand-over-fist in the corporate
server environment, it's clearly a threat, but how should the
long-term investor assess it? ... Is Linux a long-term threat
on the desktop as well?"
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