Recessions make strange bedfellows. Of all the truly huge businesses in the US, save the oil companies, Wal-Mart (WMT) and Microsoft (MSFT) are having unusually good runs.
Yesterday, the CFO of Microsoft had the temerity of saying that the huge software company was not seeing a slowdown in its business. He mentioned that one might be coming, but nothing worth talking about yet. He pointed to the company’s operations in Asia, but also said that the US was fine.
PC sales are still fairly strong. Most analysts see a low double-digit growth worldwide this year. Almost all of those will ship with a Microsoft OS, probably Vista. On the enterprise software side of the house both Oracle (ORCL) and SAP (SAP) say their sales are fine. That probably means that Microsoft’s Office and server businesses are relatively strong.
Over in Arkansas, Wal-Mart (WMT) is trading just shy of a two year high at around $50. A number of bright people said that as the economy gets worse more people will go to the retailer who offers the best bargains. Everyday low pricing and all of that.
Each of these explanations is inadequate. Even in bad times a powerful brand helps bring in customers. That is why most huge companies spend billions of dollars over decades to keep their "faces" in front of consumers. But, GM (GM), which has spent more than anyone on advertising is not having its best year.
The answer would appear to lie with the fact that even people pinched for cash need the foundation of products that support everyday living. At Wal-Mart that is food and clothing. At Microsoft it is the basic Windows glue that makes almost all enterprise and personal technology around the globe work.
Even in bad times, the essentials sell.
Douglas A. McIntyre
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