Microsoft Windows Vista’s Hidden Killer Application

Posted on January 9, 2007 , filed under Stocks | Print This Post

This is the second article in a two article series in reference to a William Trent article on his blog, The Stock Market Beat. Mr. Trent’s article made reference to the lack of investment value in installing early versions of Microsoft Corporation’s (MSFT) Windows Vista.

The new Microsoft Windows Vista operating system contains a number of usability and performance improvements compared to Windows XP. The major improvements highlighted by Release Candidate coverage of Vista consists mainly of the following features:

32 and 64-bit support

Native multi-core support

Improved file system and search speed

New Vista explorer preview that includes live previews of the last three files you used when you mouse over a folder in explorer

Built-in PVR (Personal Video Recorder) in all versions of Vista that allows you to download TV programs and get TV schedules

New Aero-Glass user interface for improved graphical effects

Flip-3D Application switcher when you Alt-Tab through your open programs

Native support for widgets on the desktop

While these are all exciting new features in Vista, the one lightly covered feature that may emerge as a possible killer application is the new OS’s much improved voice support.

Here is a quote directly from Microsoft.com on Vista’s built-in voice recognition:

You can dictate documents and e-mails in commonly used programs, and use voice commands to start and switch between applications, control the operating system, and even fill out forms on the web.

I’ve always felt that speaking would be the most efficient way to control a computer or to type a document. Most people can speak many times faster than they can type and for most people typing lengthy documents is a difficult process. In a few minute verbal conversation I can get across several pages of content that would take me a couple hours to compose and type out.

For anyone that has used the cutting-edge of voice-recognition software, they know that you have to speak in a slow and mostly un-natural way for the voice-recognition to properly work. This difficult way of speaking defeats the purpose of naturally speaking to write documents. While still not 100% natural, Windows Vista makes great strides in voice recognition that Microsoft will likely improve on.

Voice recognition has been one of the most processor intensive applications in the past and the advent of multi-core cpu architectures from Intel Corporation (INTC and Advanced Micro Devices, Inc. (AMD) will undoubtedly lead toward improved performance. Once dual and quad-core cpu’s become ubiquitous, Microsoft could theoretically dedicate one, two or even three cpu cores to the application in the future. This is all leading me to believe that in the next decade voice recognition will be the next hidden killer application on the PC. Voice really is the most natural way to interact with computers.

You really have to see it to believe it for yourself so here is a link to a screencast by Mr. Long Zheng I found recorded on a medium-low range Toshiba Portege M400 Tablet PC.

Benjamin Gauthey on benjamingauthey.com performed the samedemonstration in French.

If the Chinese version works just as well you can immediately see the benefit in the emerging economy of China since basic mouse and keyboard skills is largely a lengthy educational process due to the lack of available PC’s.

Business users can immediately derive benefit from voice recognition during presentations. If the software continues to improve I can foresee a possibility in the future of people speaking into their bluetooth-enabled phones to dictate documents to a laptop they carry around. This is all very exciting and all very possible with the new technologies coming out from Microsoft, Intel and AMD.

So what does this mean for possible investments? Well I will reiterate that I am bullish on Intel. I sold Intel in late 2006 for no-profit and bought a larger position back during its current dip. I am confident in buying the stock ahead of the consumer release of Vista. The user experience, although driven by the Vista OS, will be powered by Intel or AMD. Since Intel has a current superior performing product to AMD’s offerings it opens up a marketing opportunity for the company to capture confidence before the normally strong fall season for PC sales. It will take time to build a reputation and judging by AMD’s release schedule Intel will have a half year lead over its rival. I like Intel at current prices and I may purchase additional shares if the stock drops below $20.

Going back to voice-recognition we can consider shorting shares of Nuance Communications, Inc. (NUAN) This quote from an Inquirer.net article describes the situation clearly.

The main question I had was: is Microsoft “doing a Netscape” on both Nuance’s Dragon and IBM’s Viavoice products? In other words, how can these companies compete on desktop dictation software if the feature is “integrated” into the OS? To me, it’s just like watching “IE vs Netscape” all over again.

I doubt Microsoft’s built-in voice-recognition will have any effect on International Business Machines Corporation (IBM) since Viavoice contributes to a tiny-fraction of the companies revenues. For Nuance, Dragon NaturallySpeaking is the companies major driver of revenue. Microsoft’s offering is a major threat to Nuance and investors should carefully monitor Microsoft’s advances in voice-recognition.

*Disclaimer: The author currently owns 5000 shares of INTC purchased at an average price of $20.55.

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