Microsoft Loses the Conviction of Goldman Sachs

**Today's guest columnist is Ed Scannell ([email protected]), editor of Redmond magazine. Doug Barney will return to Redmond Report on Monday.**

Given what they describe as uncertain spending plans among IT shops over the next year, coupled with the expectations of jittery investors over the second quarter earnings report, Goldman Sachs has removed Microsoft from its America's Conviction Buy list, although it is keeping a "Buy" rating for the company.

Despite the arrival of Windows Vista and Office 2007, Goldman Sachs sees the delivery of these products as the end of an era. The Wall Street investment firm believes that several trends including Software as a Service (SaaS), virtualization and the growing specter of open source will loosen the iron grip Microsoft has held on the desktop market for well over two decades, cutting deeply into the revenues of its two cash cows.

Apparently, the delivery of a raft of other best-selling products Microsoft has promised over the remainder of 2007 and into 2008 -- including Exchange Server 2007, Longhorn Server, the Forefront line of security products and System Center Operation Manager -- has had little or no influence on Goldman Sachs' economic view of the company. Goldman believes the tentative spending plans of many larger companies into fiscal year 2008 will keep a lid on sales of products.

Speaking of Longhorn Server, the long-awaited successor to Windows Server 2003, Microsofters are expected to trot by next week with a new Community Technology Preview (CTP) of the product, which should shed some light on what to expect in beta 3 of the product. Some developers who have seen the preview are reporting on some sites that the product is looking very solid. As well it should. It feels like the company has been working on it since the first Bush administration.

Start Me Up (While We Are Still Young)
It's all over forums this week -- a growing dissatisfaction among users with Vista's slow startup and shutdown times, compared with those of Windows XP. And they aren't jumping for joy over the load times for applications, either. Many are saying it takes 10, even 15 minutes for the system to fully boot. One poor soul complained it took over a half-hour to come up (clearly, his machine was not built in this decade).

Microsoft from the start has been saying that your system's performance with Vista heavily depends on how much processing power and memory muscle your machine has. It's looking like some Microsoft officials (but not necessarily the hardware requirements on the side of the Vista retail box) really are telling the truth on this one: If you want to play Vista, come with a 2GB system and a fast (if not dual-core) processor.

Barring that, to avoid the long boot-up and shutdown time, users should seriously consider using the operating system's new sleep mode, a combined hibernation and standby mode borrowed from XP, as the permanent way to shut Vista down. This is something Microsoft has been recommending to users since at least December, more than a month before its official launch. Hmm...seems they knew something we didn't about starting up and shutting down Vista.

In an interview with Redmond magazine, David Pogue, New York Times technology writer and author of Windows Vista: The Missing Manual, said sleep mode is a rather clever piece of work by Microsoft.

"When you close the lid [of a laptop] Vista does a quick backup of everything that was on the screen and opens an invisible file on the hard drive. It then leaves a small trickle of power to keep alive everything still in memory for 18 hours. If the battery does die, the next time you open the lid it is still there -- everything you had open on the screen. It might take 30 seconds to wake up instead of two minutes," Pogue said.

The Missing Vista Manual Found
Speaking of David Pogue, we had a chance to talk with him about the latest addition to his Missing Manual series, which now has 30 titles including several on different versions of Windows and the Macintosh operating system. Pogue talked about the value of books such as his that offer users an objective (that is, not influenced by Microsoft) evaluation of the product's capabilities along with plenty of inside information about how to use those features, what it was like working with Microsoft and third-party developers as part of the research, and what his career fallback plan is in case Microsoft ever produces software easy enough to use that obviates the need for books like those in the Missing Manual series.

Redmond: Why doesn't Microsoft include a book like this on CD in the retail version of Vista?

Pogue: I have researched this quite a bit. There are three reasons. One is money; it is a dollar a box to put some literature in there. Two is time. When they finish that software, they want to ship it. They do not want to wait around for something to be edited and printed and bound. Third, their research shows that a lot of people don't even look at it when they do give them a book. The trend in the industry has been to eliminate printed manuals and I guess most people just fumble along with the online help. But that means you can't underline important sections, you have no illustrations and you can't read it in the bathroom.

Redmond: When I get a new OS, the first thing I am looking for is an insider's guide to features Microsoft typically does not tell you about. Does Microsoft purposely not put in such a guide to give book writers a chance to make money?

Pogue: I think that is true. For example, they have a sleep mode in Vista but the real story behind sleep is much more technical. The problem with standby was there were drivers and dialog boxes that would prevent the laptop from actually shutting off. So you could fly across the country and lose everything on the screen once the battery died thinking it was off and you end up carrying a 1,000-degree carrying case because it was on the whole time. But sleep does something very clever: When you close the lid, it does a quick backup of everything that was on the screen and opens an invisible file on the hard drive. Then it leaves a small trickle of power to keep alive everything still in memory for 18 hours. If the battery does die, the next time you open the lid, it is still there -- everything you had open on the screen. It might take 30 seconds to wake up instead of two minutes. You won't get that in help or brochures.

Redmond: More generally, what advantages can you provide in a book like this compared to Microsoft's own Inside Out?

Pogue: As an outsider I feel free to criticize. I can point out features that don't work well and ones that do, or ones that are put in at the request of the marketing people that are not very useful, or features that are just very stupidly done. For instance, there is this new photo editing program that is modeled on iPhoto for the Mac and it can do beautiful full-screen slide shows of your pictures -- just not with music. Well, what sort of slide show program does not let you put music to it? Or their new backup program. For the first time Windows comes with a preinstalled, ready to use backup program except you can't pick which folders you want it to back up. It will only say what types of files you can back up. For instance, you can say what e-mails or photos and music can be backed up but you can't say to which folders. There are some brain-dead stuff in there.

Redmond: Did you talk with beta users and developers as part of your research?

Pogue: Yes, I went nuts on this book. It was made clear to me both by common sense and by my publisher that this book is a once-in-decade opportunity because this version [of Windows] is so different. A lot of people will be needing a book like this and whoever has the best book stands to be rewarded handsomely. So I did tons of cruising blogs and the Web. Interestingly, this is the first version of Windows where Microsoft permitted the actual engineers and product managers to keep blogs on their areas of expertise. So there were digital photos blogs, a Windows Explorer blog and an Internet security blog. So you could keep in touch with these things as they designed them and why features went in or out during the betas.

Redmond: With search engines getting better and better, is this even more competition for book writers like you?

Pogue: Well, yes and no. The person who does that [uses search engines] is obviously the person who would not be shopping for a book anyway. Book people are book people -- people who realize they can read a book when they are away from the computer, which you would not be able to do using Google. Plus you have to factor in your time. When you use Google you are going to have to wade through three or four different things hoping to find the info you need. And many times you have zero percent credibility of the facts you are reading. You have no idea how reliable the information is in someone's blog. To ensure credibility, I did a very expensive thing. When the manuscript was finished and right before it was published I hired a beta reader to sit to read the entire book and test every single step on every single page to make sure the wording of something had not changed during the beta program or that I had not left out a step.

Redmond: You have done books on Mac operating systems as part of the Missing Manual series. Do those books tend to be a lot thinner?

Pogue: (Laughs) Yes, well, I am the author of the best-selling Mac book called Mac OS X: The Missing Manual.

Redmond: Is doing a book on the Mac OS more fun or interesting than a book on Windows?

Pogue: I used to think so. I did a Windows XP and Windows ME book, and I didn't enjoy those as much because a lot of what was in those versions of Windows was so illogical. It was like trying to defend somebody who I didn't feel deserved it. I was trying to help people understand why these features and check boxes were in there. Even I could not justify it. I felt awkward.

Redmond: As long as Microsoft continues producing software that is difficult to use, it means job security for guys like you?

Pogue: Yeah, that's right. I always joke that the day they start including decent manuals with these products, I will happily go back to my old career as a Broadway conductor. I am not necessarily going to starve if they start doing it, but at the same time I am not holding my breath waiting for them to do it.

Redmond: What Broadway shows did you work?

Pogue: The best one was Kiss of the Spider Woman. And I also worked on a Cy Coleman musical that only ran for six weeks called Welcome to the Club. That was a big flop.

Money Can't Buy You Love
The vast sums Microsoft has spent so far this year in promoting Vista has been effective, in terms of creating greater awareness of the operating system, but they're not necessarily driving sales. According to the latest Harris Poll conducted among consumers, some 87 percent said they were aware of Vista compared to only 47 percent back in December, one month before the product's official launch.

However, when asked if they were going to upgrade to Vista this year, only 12 per cent said yes compared to 20 percent who were asked that question in December. It appears the wait-and-see attitude, among consumers at least, will remain in place through most of this year.

Quote (and Prediction?) of the Week
"We've got a three-year lead, and we've never lost a game where we had a three-year lead."

-- John Chambers, Cisco chairman, talking about the advantages of his company's unified communications products and strategies compared to the products and strategies of the same name owned by Microsoft.


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