Anilrgowda

A year ago, Microsoft Chairman Bill Gates' keynote speech to the Consumer Electronics Show centered around Windows Vista and Xbox 360. At the time, the Windows upgrade was struggling with bugs and had no launch date in sight; and the Xbox 360 game console was suffering from major production shortages.

Needless to say, the audience reaction was lukewarm.
This year, the CES crowd cheered during a demonstration of a new feature for Windows Vista that allows screen savers or computer wallpaper to run moving video. The new PCs running Windows Vista generated buzz and Microsoft declared itself the early leader in the console wars.
"This year is a little bit of a watershed year for us in that people can tangibly see what we are doing," Robbie Bach, president of Microsoft's entertainment and device division, said in an interview on Tuesday at CES.
"What you saw were real products, real strategy and a real explanation for what we were doing," said Bach, who joined Gates on stage during this year's speech.
After five years, over 50 million lines of software code, 2.5 million testers and more than its fair share of stumbles, Windows Vista will finally launch on January 30.
The long-awaited upgrade to Windows -- the operating system that runs over 90 percent of computers -- is the linchpin in a wave of new products aimed at accelerating growth at the $44 billion software giant.
Microsoft says Vista's 3-D graphics make it an ideal platform for video games and the company plans to introduce games that can be played online by PC and Xbox 360 users at the same time. Opening up Xbox's online game community to PC gamers could create a huge audience for advertisers and content providers.
Vista was designed to manage better and display digital media -- photos, songs and videos -- than predecessor Windows XP. If consumers use the PC more as an entertainment hub, it could drive demand for a home server that stores, backs ups and distributes media between more than one PC in the home.
MORE ROOM FOR GAIN?
The buzz from CES and positive feedback to Vista are welcome news to Microsoft investors who have pushed the shares up 32 percent since the end of May. Microsoft shares closed at $29.96 on Tuesday, near their 12-month high of $30.26.
Jason Maynard, an analyst at Credit Suisse, sees more room for gains after what he saw and heard at CES.
"We are incrementally more positive about the potential for the stock to continue moving higher," Maynard wrote in a note on Tuesday, reiterating a $35 price target for Microsoft.
"Visually, the (Vista user interface) looks great, and there were a number of new, innovative PCs being held specifically for the launch of Vista," wrote Maynard, who added that Microsoft could benefit from consumers opting for more expensive versions of Vista in the new PCs.
Microsoft trades at 21 times analysts' estimated earnings versus a multiple of 34 for Apple Inc. and 47 for Google Inc. However, the stock's valuation is higher than software peer Oracle Corp.'s 18 times.
Redmond, Washington-based Microsoft is not completely out of the woods. Its online services group faces an uphill climb in closing the gap in Web advertising on search leader Google.
Microsoft's Zune portable music player faces an aggressive and dominant market leader in Apple, which set off an 8 percent rise in its stock price on Tuesday by unveiling a mobile phone coupled with its iPod.
Bach said Microsoft did not expect to win over the market in a few months and saw Zune as long-term business.
"This is not a two-month thing. It is not a fiscal 2006 holiday thing. It's a three-, four-, five-year thing," said Bach, who oversees the video game, mobile phone and Zune music player businesses. "The first step is absolutely the hardest."