Three Buccaneers: Cramer, Lashinsky and Seymour Tackle Microsoft

James J. Cramer, Adam Lashinsky, and Jim Seymour chatted on RealMoney.com Thursday, Jan. 18 at 5 p.m. EST.

TSC-RealMoneyLaura: Ok, we are ready to roll! We'll take a few questions on Microsoft before the call.

mrjoshua-guest: What single thing at MSFT will signal a future PC turnaround?

jimcramer2: I think that we just need to see stability, which is what I am seeing, and then we will let the Fed do its work because these are items that need a better psychology to buy and we have it.

RM_Adam: Lemme take a stab at this too...perhaps the correct question isn't when we see a PC turnaround...but rather when it stops getting worse. If we hear them say the worst is behind us or something that sounds like that perhaps that'll be akin to your "turnaround".

jseymour1: This isn't a "single thing" situation. No big PC turnaround coming for months. MSFT can't change that.

RM_Adam: Lemme say one thing from the get-go: as I've said before, I just wish Steve Ballmer would be on this call. I want to hear from the CEO NOW.

greenhorn888-guest: How will the Xbox influence MSFT, are they really capable of selling 100 million units?

jseymour1: Xbox will have a BIG impact on Q4 for MSFT...if it gets out on time. It's enough better than PS2 that, thanx also to Sony's (SNE Quote - Cramer on SNE - Stock Picks) production bobble, X-Box is going to get a roaring-start launch.

RM_Adam: IMHO, count on them to miss whatever projections they make on Xbox. This is a consumer hardware product, Christmas delivery, tough business.

jimcramer2: Having fallen in love with Madden Football on Playstation 2 I know these things are huge!

RM_Adam: I think Xbox eventually will rock.

jseymour1: The Big Q: How much will MSFT have to compromise the product to get it out in time?

RM_Adam: Maybe a big hit for softee, but not soon.

bruceseattle-guest: How has MSFT's fallen stock price changed the company's employees stock option liability? What does this mean for us non-employee shareholders?

RM_Adam: Though this is important financially, I'd get more worked up about adoption of Windows 2000 than employee stock options.

jseymour1: I think the real issue is how much the big MSFT move up so far this year has HELPED with morale, recruiting, retention. Far more important than impact on non-employee shareholders.

RM_Adam: Hey, quit agreeing with me without telling me so! I think everyone's happier when you and I disagree, Mr. eToys (ETYS Quote - Cramer on ETYS - Stock Picks).

jseymour1: OK, dammit, you're WRONG, Lashinsky!

bleavittii-guest994: Any thoughts on Microsoft's legal wrangles going forward? Is the Bush premium now built into the stock?

jimcramer2: I think that it is somewhat built in but I also think there is a likelihood that MSFT wins on appeal. I feel that this will all go away in a few months. I don't know may people who think that MSFT wins outright on the appeal, but I think they will.

RM_Adam: I just got through reading Auletta piece in New Yorker. It's amazing how close MSFT came to settling. They came off looking good. Again, the stock isn't about the lawsuit anymore. It's about this company growing again.

jseymour1: We're going to have to start calling this the "Ashcroft Premium," since he's said he thinks what Department of Justice did was dead wrong.

RM_Adam: Good point. Jim S, you think he gets confirmed? Ashcroft, that is?

jseymour1: Absolutely, because the Senate tends to confirm its own. Lots of noise, but in the end, he goes in.

RM_Adam: Don't forget John Tower. Kennedy could wreak havoc, but anyhew, back to Mr. Softee.

jseymour1: Anyone listening to the MSFT webcast must realllllly be getting tired of that music from Seattle's OTHER prominent person, Kenny G.

jpfct_aol_com-guest: Is MSFT/Intel (INTC Quote - Cramer on INTC - Stock Picks) hurting Sun MicroSystems's (SUNW Quote - Cramer on SUNW - Stock Picks)server sales i.e. Ultrasparc 3 delay? Tks.

jseymour1: On some level. UltraSparc sales over time will be hurt by the success of Itanium (64-bit CPU) and Win2K's high-end versions....

michaelgama-guest: Fellas, SUNW revenue's a little lite, is it holding after hours in glow of MSFT?

jimcramer2: SUNW is doing well after hours although it traded higher during the day. If I had to rank these I would say that MSFT is "good" if only because we were prepared for the worst, but that SUNW and Nortel (NT Quote - Cramer on NT - Stock Picks) are not as good but people don't seem to mind. People want to own tech right now and they want to own it ahead of the next ease, which might be imminent. I can't blame them. You can't stay out when the Fed is easing. I would focus on MSFT though.

jseymour1: I think SUNW dodged the bullet for another quarter, that's all....

RM_Adam: Jim, let's talk instincts for a moment. How confident are you this truly is a bottom? Cuz Seymour's implying it's not the bottom at all. My instinct says he's right.

jimcramer2: I am extremely confident that we have reached the bottom but it is because of macro concerns--as long as Fed eases we are out of woods and you have to be long, tech is cyclical and another ease, which we are about to get imminently will take the NAZZ up big.

jseymour1: LOTS of stories about SUNW working the discounts hard to get business on the books this Q.

jimcramer2: SUNW, I think is not as good because it still has some dot.com exposure that I worry about but these stocks have come down very big and people will grab at anything right now ahead of the second ease.

jimcramer2: SUNW's salespeople, already fabulously aggressive (and that's a compliment) really out-did themselves this Q. Multi tasking here, listening to call and questions Q2 results much less interesting here than Q3 (i.e., looking forward guidance).

jimcramer2: Listening to call right now, all boiler plate at the beginning

RM_Adam: Right Jim, It's all about guidance. Carla Lewis, Softee's Investor Relations woman if we can't have Maffei anymore, at least Carla's still there!

jimcramer2: I am betting with my action alert that the guidance will be good and the upgrades will flow like water tomorrow.

RM_Adam: Upgrades, let's wait and see how Sherlund reacts.

jseymour1: The 8% rev increase, Q over Q, *was* impressive, given the state of the mkt.

RM_Adam: 'Cuz it's all about Sherlund, no?

jimcramer2: I love Maffei and think that TSIX is a winner, mostly because of how much I liked him when he ran the calls at MSFT--last time it was smooth, although Connor strikes me as a good guy

jseymour1: Yeah, Greg Maffei was great. They need his juice these days!

jimcramer2: People underestimate how important he was.

RM_Adam: Interesting 50% move in 360 Networks (TSIX Quote - Cramer on TSIX - Stock Picks) just since early December. When I believe you started looking at it Jim.

jimcramer2: Fed ease works wonders.

jseymour1: And the TSIX move was counter the direction of its industry.

jimcramer2: So far nothing new.

RM_Adam: I thought the living CLECs all moved up in recent weeks. Right, back to Softee, just reading the press release now. Essentially.

jseymour1: "Total worldwide PC sales, all channels, was in the past Q in mid single digits," sez Scott B. WOW!

RM_Adam: What's relevant here is that Microsoft is reviewing the December quarter, which they telegraphed when they pre-announced. We want to know their outlook. We want to know what Ballmer is hearing from customers.

jseymour1: "A record Q for the Windows business." Hmm...

jimcramer2: We are, these days, thrilled, when nothing got worse since the pre-announcement, so far so good. Remember the psychology, if you pre-announced n December, we don't want to hear things got worse since December and it didn't here.

RM_Adam: Fair enough. I'm going to fall asleep if they don't stop talking about the reliability of their servers. Get to the GOOD STUFF.

jseymour1: Funny how both MSFT and Oracle(ORCL Quote - Cramer on ORCL - Stock Picks) trash, then praise, the TPPC benchmarks...depending on whether their product's on top at the moment.

jimcramer2: Captive audience, can't blame them.

jseymour1: Jim, what's the old lawyer's advice? "Talk the law, if the law's with you; talk the evidence, if the evidence is with you." Snooze....

danfitz0-guest: Does MSFT hedge against currency fluctuations? They seem to be blaming flat revenues on the Euro.

jseymour1: MSFT has historically been VERY active in buying forward positions in foreign currencies to hedge risk.

RM_Adam: Funny they're hyping MSN now; when they pre-announced, it was one of the problems.

jseymour1: Self-consciously "good-newsy" call.

RM_Adam: "Online advertising business had a great year, by any measure." BUT, lower than anticipated net revenue. My guess on the "consumer" business at Microsoft (MSN, WebTV, etc.): they ditch it one day. just plain get rid of it.

jseymour1: I'm skeptical, Adam, I think MSN is a strategic hold-on business for them.

RM_Adam: Re-iterates that company is being careful with costs.

jimcramer2: For those new to this process, MSFT is rehashing what went on and we know most of this stuff although there can be surprises. The stuff that drove the stock down the last few times came during the guidance and we don't know what that will be yet. I always counsel that if you don't wait until the guidance you could get in trouble.

RM_Adam: And getting back to the 'good old days.'

jimcramer2: I think the guidance now will be fine though changed environmentIntel.

RM_Adam: Maffei always would effectively say: This is the important part; the rest you can ignore.

jimcramer2: Didn't guide higher and it didn't go down, That's bullish If MSFT just says nothing it goes higher in this market. Repurchased--22.8 million shares--very bullish. Put warrants less of a factor. Bullish again. You lower numbers enough you beat them--that is the hallmark of this reporting period.

jseymour1: Jim, 22.8M shares bought back was just a way, with the stock price down, to provide shares for employees who vested...not a statement of confidence in the stock.

jimcramer2: But the buyback occurred in a very tight timeframe which matters a great deal. They are a decent percentage of the volume. Here we go.

jseymour1: Buy at the bottom, put 'em in the freezer. They can afford that cost-of-holding gamble.

jimcramer2: Low double-digit growth in pc. Connor saying we have bottomed.

jseymour1: Aaarrrggghhhh! Worldwide PC growth UP to low double digits? Gimme a hit on that doobie!

RM_Adam: Sorry. Disagree. Didn't hear him say it can't get worse.

engofct-guest: Hi Gents, MSFT, NT and SUNW all met estimates, how are their revenues?

jseymour1: As I posted on Columnist Conversation awhile ago, all good.

RM_Adam: On contrary, he said if economy worsens, MSFT weakens.

jimcramer2: Jim S, Market will believe , Adam, said double digit pc up from single digit.

RM_Adam: Ah, good point. To "very" low double-digits. But you're right.

jseymour1: Estimates of net increase in revs in 2001 hard to believe.

jimcramer2: Cisco (CSCO Quote - Cramer on CSCO - Stock Picks) said that at $34 and it is at 43!

jseymour1: March Q revenues established down from this Q.

jimcramer2: Microsoft is not talking things down so I think this stock goes through $60 tomorrow.

jseymour1: Corp revenues up "in the high teens" in Q3, Q4 of calendar 2001? They can make it if, as I think this is the year W2K takes off.

jimcramer2: I reiterate that those who can buy this stock right now ahead of tomorrow should do so. This is exactly what the Street wants to hear. They will love this.

jseymour1: Investment advice: Get off the damned call and go buy some MSFT shares!

jimcramer2: Thanks Jim, you said it better than I did.

RM_Adam: I agree that this is different from nine months ago, when they started being very negative. That means only one more quarter of tough comparisons, if biz holds.

jseymour1: Think we'll hear anything about legal-problems resolution in 2001?

RM_Adam: They rarely mention legal issues in these calls.

jimcramer2: This is such a different call from the last few. This is upbeat and it will drive the stock higher (I am not long it-but I wish I were). Connor sounds bolder more bullish than the last four go rounds. Legal issues going away, Fed ease. And they aren't bearish, I like this.

RM_Adam: No guidance for fiscal 2002.

jimcramer2: Pressure will be to keep this sucker at $60 -- I don't see it happening, I think it could break out.

jimcramer2: No guidance for fiscal 2002 will be viewed as okay, and we are hearing no more than a tiny talk down.

cgamblin-guest: If MSFT will be upgraded tomorrow, what else will it take with it?

RM_Adam: Arguably, the whole PC group. Maybe not upgrades, but increases. Dell (DELL Quote - Cramer on DELL - Stock Picks), Compaq (CPQ Quote - Cramer on CPQ - Stock Picks), INTC.

jimcramer2: Exactly. The semis, Gateway (GTW Quote - Cramer on GTW - Stock Picks) which is almost back to where it was when it pre-announced.

RM_Adam: Okay, the questions from analysts begin. this is where you get Wall Street's tone.

jimcramer2: Q&A -- I bet love fest.

jseymour1: MSFT Wrap-up: And God, Motherhood and the Flag....

jimcramer2: I am long those!

RM_Adam: I love how Sherlund gets first question. Always.

jimcramer2: My bet, Sherlund upgrades in a.m.

RM_Adam: Asks a complicated, near-term question. no "congrats."

jimcramer2: Softball.

jseymour1: But Adam, we'll certainly hear some of those supercilious "congrats" remarks from SOMEone.

jimcramer2: Readerman asking where is this confidence coming from, decent question.

RM_Adam: Yes. Remember, readerman has been very bearish.

jimcramer2: Strength in second half, new mantra.

RM_Adam: Sorry, Jim C, I didn't like that last answer.

jimcramer2: Services, Windows 2000 to be strong in second half. That's the new answer, don't worry.

jseymour1: Q&A almost as glib as the fwd-looking guidance.

jimcramer2: About next two quarters--second half rosy. Forget the valley.

RM_Adam: They're looking for 2H to include strength in consumer biz? That's first half of the calendar year. I think that's optimistic. Jim C, when you say 'strength in second half' the new mantra, you mean 2H of calendar year or 2H of Softee's fiscal year (which ends in June)?

jseymour1: FWIW, I grow increasingly skeptical of this Dr. Feelgood call. I think the market will bite tonight and in the morning, but MSFT's really on the edge here.

jimcramer2: You have to understand that the CFOs of America are all preaching "Look, Fed will bail us out." Even the canadians at NT mentioned the Fed will bail us out on their call.

RM_Adam: But does that translate into increasing captial expenditures in Fortune 1000?

jimcramer2: Amazing, just amazing, the street is in no mood to argue with strong second half from fed ease, it just wants to buy.

jimcramer2: Yes Adam, a fed mandated bull market to replace the fed mandated bear market we just went through. Arguing that it wont be a robust second half has taken on the coloration of arguing against patriotism and the constitution and city hall.

jseymour1: FYI, I agree w/MSFT's optimism about sales of W2K DataCenter Edition growing in second half of calendar 2001, into 2002.

RM_Adam: OPOC's Melissa Eisenstadt wants to know why the great plains acquisition. Connors: it's about small business.

jimcramer2: Away from Soft, Emulex (EMLX Quote - Cramer on EMLX - Stock Picks) and NT saying right things. Holy cow! A great night for earnings. Just a great night in a business that is controlled by the previous night. Reuters running stupid story right now about lower than expected Q3 EPs for MSFT. Hope it comes in on that story, which doesn't capture any of this call, and you can make a buck more.

RM_Adam: Yep, that's just wrong, right?

jseymour1: Interesting that NT affirmed its earlier estimate of 30%-35% 2001 growth in revs and earnings.

jimcramer2: Tiny guide down -- almost non existent, But Reuters gets things wrong and people act. I would be buying stock at Cramer/Berk on that numbskull's story right now. Oops, I meant, "not so smart guy" vowed to be kindler and gentler now that I am here.

RM_Adam: I've heard you say worse than "numbskull"

jseymour1: Tomorrow a.m.'s ("Ledes".) on the call: "Microsoft Beats Targets, Surprisingly Bullish on Year Ahead. Wall Street cheers!"

jimcramer2: Shoot--I just wrote that on RealMoney!

RM_Adam: I'll stick my neck out, you guys way too bullish.

jimcramer2: Tomorrow headlines today. I am cutting Adam's neck off right now.

RM_Adam: Yes, it's not bad. But come on, not out of the woods yet.

jimcramer2: Connor saying things picked up since the call!! The preannouncement.

RM_Adam: Yep. Suggested the sales force worked harder.

jseymour1: Hey, Adam -- I'm NOT that bullish on the likely real results for MSFT in call 2001 -- but I do think that shorter-term, MSFT said what the Street wants to hear.

RM_Adam: After the pre-announcement shame. You said that cuz Cramer told you to! (just kidding)

jimcramer2: Adam, there are moments when you must suspend skepticism; when the Fed eases skepticism hurts.

jseymour1: Yeah -- the suspension of disbelief...and reality.

jimcramer2: Mister Softee locked at 9--will see $61 tomorrow

RM_Adam: Journalists NEVER suspend skepticism.

jimcramer2: Traders suspend it routinely, investors are in a perpetual state of non-skepticism!

jseymour1: Great, skeptical Q on lagging demand for Office suite.

jimcramer2: This John Connor sounds more like the one in Terminator than the old one.

jseymour1: I think Connor is just now coming into his own, in the best bully-boy MSFT management style (They leave the class-action shareholder suits about misleading forward-looking comments to the legal team).

RM_Adam: No question it feels better to deliver non-bad news than bad news.

jseymour1: I like that, Adam, rewrite those ("Ledes".) for tomorrow: "MSFT Delivers Non-Bad News. Market Cheers!"

jimcramer2: Look, the truth is that you have to be a real Pollyanna to believe this stuff

jseymour1: EXACTLY!

jimcramer2: But there is going to be a buying panic out there and MSFT is going to be a key part of it because it gave no negative guidance.

jseymour1: But Pollyanna-ism is a big factor in trading in tech stocks today.

mrjoshua-guest: any questions about Xbox from the analysts? This is a potential blunder for MSFT.

jimcramer2: The buying panic stems from the need to put on performance or fall behind the NAZZ.

jimcramer2: No xbox questions.

RM_Adam: Connors said Xbox is looking good. No details.

jimcramer2: Adam, Jim, was anything looking bad? I heard nothing bad.

RM_Adam: Agreed, nothing bad.

jimcramer2: GOES HIGHER

RM_Adam: I was just reading was Sherlund wrote on day of pre-announce: We look for very little, if any, earnings growth over the next year.

jimcramer2: He upgrades.

RM_Adam: The company's new dot.net products are likely still a few years from commercial availability, so there are not likely to be new growth drivers other than a more accommodative PC upgrade cycle over the next year or two only one thing's changed: the fed.

jseymour1: The MSFT news might even challenge the Jesse Jackson story for p1 display in the morning.

jimcramer2: The last few calls have been so bearish and frightening, this is so upbeat as to be unbelievable. You got it Adam, Fed cure all.

jseymour1: Jim: Classic "rubber-banding."

RM_Adam: Come on Jim S, even if you guys are right, the big national dailies don't make this A1. I'm sure you're kidding.

jseymour1: SLURP! I was being sarcastic, Mr. Lashinsky.

bruceseattle-guest: Any comments on the implications of MSFT's revised forecast -- the press release says year rev will be 25.3B, next quarter will be 6.35B, and with subtraction of H1, you get 6.565B for Q4 (still less than Q2). So, the worst isn't yet behind MSFT, but expectations seem pretty low.

jimcramer2: That's not the takeaway of the call at all.

craigeham-guest: JJC, don't you think that MSFT will have trouble cracking 60 tomorrow since that's where the puts and calls are heaviest?

jimcramer2: I think that if Sherlund upgrades it explodes through the strike and you get a gallop higher.

b2b4me-guest: If MSFT lucky to grow 10-15% and $58/1.82 = PE 32...Why is SUNW not moving they project growth 30-35% and $34/0.69 = PE 49, SUNW growth much faster PE not much higher?

RM_Adam: Softee was beaten up far worse than SUNW. That simple.

jseymour1: Different businesses. And SUNW's right on the edge.

jimcramer2: Exactly.

samtrader-guest: JJC and Jim Seymour, where do you see MSFT ending up with options expiration tomorrow it's at 58 now?!

jimcramer2: I think that it could break out, if it gets pinned at $60, it is a great opportunity as MSFT is done going down for now.

jseymour1: I think the morning will see several upgrades; the stock will punch through 60 and probably hold for a close of 62-64. Of course, some profit-taking on this unexpectedly good call.

e051765-guest: Does MSFT have any B2B exposure?

RM_Adam: There is no such thing as B2B. MSFT is a very large supplier to corporate America. B2B is enterprise software, period. Microsoft sells it.

jimcramer2: I have to hop -- good night all.

jseymour1: Adam, serious B2B players need Sun + Solaris for capacity and speed, it's not a Win2K business, yet.

fordmw-guest: Could you share thoughts on competence of MSFT CEO Ballmer?

jseymour1: Steve *who*?

RM_Adam: Hge.

jseymour1: Ballmer? Where was he?

RM_Adam: No one questions his abilities or his commitment. He maybe even a better CEO than gates.

elwagner-guest: What stocks will also get a lift out of this MSFT news in the morning?

jseymour1: If people believe these airy MSFT forecasts for growth in PC sales, the boxmakers are obvious candidates: DELL, GTW, etc.

RM_Adam: I refuse to analyze this in terms of a trade (now that cramer's gone!!!). I think "not-bad" isn't the same as "good". Maybe stock trades up tomorrow, but MSFT is not out of the woods and neither are Dell, GTW, CPQ, etc.

jseymour1: But the Street thinks "not bad" is *fine* right now, Adam.

RM_Adam: Yeah, I think that's illusory. One fed cut, PUH-lease.

ja7294-guest: If MSFT wins the antitrust suit, will the share price get a bump?

jseymour1: Sure. It already has a lot of Bush/Ashcroft Premium built-in, but seeing the legal problems finally ended, in MSFT's favor, is worth at least 10 points more on the day it's announced.

RM_Adam: Again, it's just not a near-term concern. They won't "win" until appeals court rules.

mrgrinch-guest: What will be the long-term effects of MSFT earnings, in regards to the entire software industry?

jseymour1: When MSFT revenues go up they lead the industry.

aorrino-guest: I've heard some analysts/fund managers call MSFT a 'value' stock. What are your thoughts on this?

jseymour1: It's been so mo-mo lately that I'm reluctant to say yes, but IF the MSFT stuff on the call comes true, then yeah.

RM_Adam: Well, sure, the stock was at about 55 when it pre-announced, and it's come back only now. It sure was a value play. See ya, thanks all.

jseymour1: Thanks, everyone, for joining us. This was fun and -- I hope! -- valuable. Believe me when I say we'll definitely do it again.