Goldman Sachs’ strikes Microsoft from its Convictiion Buy List

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.

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