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Another Sell Rating?

The first order of today is to note that most of our recent reports were sells, which although rarely good for business...it is what it is:  a richly valued market fraught with more risk than reward by arguably any reasonable measure, and Microsoft is no exception here.  In fact, the entire software space looks even more richly valued as noted in our Mini-Re™ Reports.

Microsoft Enterprise Report Card

The Lupo-Kioutas Enterprise Business Model© (patent pending) and Microsoft Company Report Card.

As with all of our company specific equity analysis, we utilize the Lupo-Kioutas Enterprise Business Model© to determine a company's core profit engine that drives actual earnings and revenue.  Below is a brief report card from the model as it pertains to Microsoft.  For more on the enterprise business model click here.

Fundamental Analysis the Vista Business Model?

MS Vista Bad Security =  Good Business Profit Model

Whether Vista, or NT, or Windows 3000 Microsoft will always be like a diner whose doors are never locked from a security perspective (diners are 7x365 operations). After all, we ask, how long does it really take one to secure an operating system, 5 years, 10, 20, or...and you get the point? In fact, Microsoft has been using the 'community model' of software quality assurance and bug fixes for well over a decade. It works, and it is cheap, despite the embarrassments and feigned rhetoric to improve security.
 

Recently, security vendors complained about access to the OS kernel, and rightly so. But just imagine how many security vendors would be out of business if Microsoft exposed the kernel several months before product launch and the operating system were locked down like the most recent rap star.  Who would need a security product then? What about all of the security service practices, and billable hours lost. And those maintenance contracts with patches and service level agreements and unscheduled down times...poof!

The delay in kernel access by MSFT is simply an opportunity to afford yet another new Microsoft product, which will also need some security fixes and support:  exactly why Microsoft received an F in social responsibility, since many PC's are now peoples livelihood and should be treated with greater due diligence.  Sometimes profit models need to be set aside particularly when people and business are at risk of injury.
 

That leads us to the grumpy ending of the otherwise happy story known as the 'earn a buck policy circle'.  From an operational perspective, whether data center, desktop, or in house IT shop with Microsoft operating systems the costs and risks are always high--too high.  In addition, the standard for operating system security is now at a very low common denominator.  Even the DOD, CIA, etc, and other sensitive government agencies have cowered and lowered their standards of security due to Microsoft's history of outright neglect. These agencies cry, "what do we do, we must accept these flaws otherwise we'll be out of support, right?"  There are solutions and alternatives, but that is a later report.

 
Concluding the fundamental portion, poor security is very good business all the way around, with one exception.  By analogy, it works similar to the insurance industry with most of the information technology consultants acting as the repairman after the Microsoft product accident and business and operations are simply the insurance claims adjuster paying for the repairs, out of their pockets or taxpayers pockets, of course.

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