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The Economist Is Wrong About Microsoft Corporation (MSFT)

Microsoft offered $1 billion for the Nook business, after investing $300 million in it last April. The Nook business brought in $933.7 million in sales last year, compared to $695.1 million a year earlier. It is, by far, the fastest growing part of Barnes & Noble, Inc. (NYSE:BKS), and more than 100 million units have been sold. Some 533 employees are tasked with making it a viable competitor against not only other e-readers, like, Inc. (NASDAQ:AMZN)’s Kindle, but against all tablet computers, a space dominated by Apple Inc. (NASDAQ:AAPL)’s iPad.

Reason #2: Windows is no Coke

Yes, any operating system might have some bugs in it, and Windows 8 is no exception. But that Microsoft Corporation (NASDAQ:MSFT) has admitted to having a problem is encouraging. Few firms are good at recognizing their own flaws. The Coca-Cola Company (NYSE:KO), in contrast, vehemently argued that New Coke tastes much better and hence – it will stay.

And recognizing a problem very often leads to its fixing. Mr. Softy has just added Outlook to its new Windows RT,  and has added back the missing “Start” button from Windows 8. In contrast to Microsoft, it took Coca-Cola a few very long months before it decided to listen to its fans and restore the old taste of the sugary drink.

Microsoft, though, does resemble Coca-Cola in other, much more positive, ways. First, both have absolute dominance in their respective markets. Coca-Cola holds the largest beverage market share (40%) in the world. Microsoft holds the largest OS market share (90%) in the world. Second, both keep a big portion of each $1 of sales. Coca-Cola’s operating margin is at 30% while Microsoft’s is at 35%.

The Foolish bottom line

Microsoft Corporation (NASDAQ:MSFT) was late to recognize the transition to mobile computing. But it has recognized it and is making huge steps to control market share. I believe that, in time, everyone- including The Economist, will recognize the innovative power and financial strength of Microsoft.

Shmulik Karpf has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola. The Motley Fool owns shares of Microsoft. Shmulik is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article The Economist Is Wrong About Microsoft originally appeared on and is written by Shmulik Karpf.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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