Gadgetory

a little more whale watching for you guys at hedge funds I'm favorite nine for boosting is staking like I'm shocked by watering sixty-three percent I know it has been proven a very smart guy but with Microsoft essentially been dead money for five years we're really asking what exactly does he see in this company well joining us now is Richard Williams Microsoft analyst at cross research and jon rettinger president of TechnoBuffalo rich i was reading your notes and it said you're very bullish on Microsoft there is so much to like where do I start well make a crack at it well the nice thing about Microsoft is that you've got very strong cash flows and a solid three-quarter streak of beating expectations but we look forward into the mobile space and because of what's happening with Google and Android we think it really adds a lot of value to the windows phone 7 franchise as we go into year-end so essentially they're going to try and pick up a lot of what Android is likely to lose because of these patent wars and it's steve ballmer smarter than people think and would you poo-poo what all the calls to get him replaced Richard what I think what we've seen over the last few years in retrospect really starts to paint a different picture than I think most investors are aware of it looked as if Microsoft was mired and unable to move but now when you look back and see how all the sudden Microsoft went from being under the Department of Justice and EU antitrust commissions to suddenly now Google is under that lens with some Microsoft help behind the scenes same thing with search I mean Microsoft is the only company i'm aware of that was able to take zero position in search for example that's a monopoly owned by Google and grow it to thirty percent okay John John I hear what Richard is saying and I definitely talking to Richard for years and I respect his position but at the same point listen you know what we can make the same case every year from Microsoft lots of cash number one leader in you know office program no more leader in Windows why hasn't the stock reacted for five years when it is fairly easy to at least on paper make a bull case for Microsoft so we're finally starting to see Microsoft used some of those capital reserves don't forget about that gigantic skype app in just a few months no matter what Microsoft does in the mobile space that's still a fringe business and richer was just on skype but yet as far as I know he didn't pay to be on skype right they paid eight billion for a free product but people what we're looking at in the integration electron oh I was looking at a potential integration with that Windows Phone 7 platform they have a new release code names deliciously mango coming out very soon but you're expecting to see skype integration brought into that so why you might not pay for the service the service is going to be in front of you there's a potential for ad space there an ad space for searchers are a tremendous potential revenue stream for Microsoft well you know Richard Richard I was one of those those early skype deal bashers and it was a knee-jerk reaction it didn't you know for whatever reason but as I'm driving the work I've got skype on my android phone I'm talking to my son in Hong Kong it's all free of course at this point I keep thinking to myself is there some way Microsoft can somehow do something with skype that would integrate it in a way google has integrated google maps to be so perfect that it actually works because by the way when i'm using the skype and i'm in the car and I'm it's not quite that great um well it is there something that people are missing you have the telecommunications for absolutely there is i would agree as well i think that the fact that facebook is free and they're generating multi billion revenue numbers and google searches free and they're producing tens of billions in revenues I think it's just a function of monetizing it and in the end I look at Microsoft Google as being searched it's a search war and it's effectively Microsoft's trying to transition from its OS with the incredible gross margins into new world and Google's trying to fight back with maintaining its it's great gross margin on the search side by going into China and India we think as part of this motorola deal okay retain John thank you very much for joining us thank you