2HRS2GO: What me worry? Not about MSFT drop

Microsoft (Nasdaq: MSFT) must be one of the few non-pure-Interent companies that can shed 17 percent in two months and keep a mostly confident investor base.

Have an opinion on this?

Since Dec. 27 the Evil Empire has tumbled from an record peak of 119 1/8 to just above 98 early this afternoon. The latest plunge has a few people talking; this week technical analyst John Murphy appeared on CNBC to discuss weaknesses in Microsoft's recent chart.

In a follow-up piece that appeared yesterday on CNBC.com, Murphy pointed out three worrisome signs. Microsoft's "MACD" lines -- basically smoothed out moving averages of closing prices -- are currently heading south. MACD fell short of a new peak when the actual share price set a record high at the turn of the year. And MSFT shares are close to falling below the trendline that shows where the stock has been bottoming out in each of its peaks and valleys over the past year.

Momentum traders can't get enough of this stuff. Although no technical indicator is perfect, you can't blame traders for relying on them in this case, because they've been decent predictors of MSFT behavior in the past.

In the short term. On other hand, if you're an investor -- you know, the kind of person Tokyo Joe sneers at -- Microsoft's chart should be comforting.

If you're good at reading charts (I'm not), you can make a lot of money. But one thing about technical analysis: it can help you spot patterns early, but it can't show you trends before they start. They can't tell you if momentum will shift, say, tomorrow or next week or whenever. No one can.

But history can at least be a comforting guide.

Consider: in the past two years, Microsoft has been through five instances where shares dropped significantly (which I'm arbitrarily defining as "You can really see it on the chart") after reaching an all-time high. Microsoft's last two major product launches were Office 2000 last spring and Windows 98 the preceding fall. In the seasons before each of those debuts, Microsoft shares slid as much as 15.6 percent and 18.1 percent respectively.

Sure, you could have traded Microsoft furiously during that time and, assuming you're reasonably competent, made some quick cash.

Or you could be like most Microsoft shareholders who hold onto the thing and ride it out. It's a strategy that has never failed, guarantees you'll never miss any portion of a run-up, and lets you avoid the capital gains hits of trading frequently.

Perhaps the 17 percent slide has you more nervous than usual. Just remember the stock the past has fallen as much as 20 percent before, yet every time Microsoft starts shipping a massive, bet-the-bank product (as opposed to Microsoft Bob), the stock rebounds to a new peak. Those negative MACD trends have never lasted for more than a couple of months.

And you know what's coming: Windows 2000 makes its big splash tomorrow.

I can hear the disputes already. "Linux will rule", "Windows 2000 sucks", "63,000 bugs, it's a joke", blah blah blah. Decry Bill Gates' business practices all you want. Scream for DOJ knives if it makes you happy. Point out every technical flaw in Microsoft software if it makes you feel better about yourself.

Maybe the critics are right about everything. I doubt it, but even if they are, there's no reason for investors to care. A seemingly infinite number of bugs didn't stop Windows 95 from being the most successful desktop software product in history. Windows 98 generated billions even though some enterprises to this day won't use it.

Microsoft skeptics preach from the same book as stock market bears. Logic predicts a prolonged downfall someday, but more than a decade has passed without one, a couple of hiccups notwithstanding.

Forget technical analysis (both stock and product) for a moment and ask yourself: has Microsoft ever let shareholders down in the long run? You don't need a trendline or MACDs to answer that one.

Other issues:

Netcentives

(Nasdaq: NCNT) During an interview last week at the office of this manager of online customer rewards programs, CEO West Shell hesitated momentarily before answering a question about acquisitions with the boilerplate "We're always looking" response. Maybe he was thinking of the Post Communications acquisition announced today.

Post specializes in e-mail marketing, which makes the deal seem a bit ironic since Shell dimissed other bonus rewards companies -- Mypoints.com (Nasdaq: MYPT) and Cybergold (Nasdaq: CGLD), specifically -- as, well, e-mail marketers.

To be fair, note that Netcentives is different from the others in that it's more of an infrastructure company, as is Post. Netcentives provides online businesses with technology and a network, but it's up to the companies themselves to oversee and market the programs. Mypoints.com and Cybergold work with consumers more directly; it's sort of, but not quite, like the difference between Inktomi (Nasdaq: INKT) and a Web portal.

But Shell still might want to differentiate Netcentives in other ways besides direct marketing. Not that I'm one to talk -- I used the same description in a piece about a few weeks ago. 22GO>