O woe! Poor Microsoft. First venture capitalist Paul Graham announces the company is "dead," then Goldman Sachs unceremoniously drops it from its list of premier stocks. These two events triggered lots of response.
I'll leave to others the job of describing the robust nature of Microsoft's finances, even if its wad of cash has shrunk recently. Instead, look at the two items.
First, even though Goldman dropped Microsoft from its "Americas Conviction Buy" list, it still rates the stock as "buy." It just doesn't back up its "buy" recommendation with "conviction." It's also worth noting that among other companies dropped from this list in the last six months are: McDonald's, Wal-Mart, Humana and—drum roll please—Apple. (Apple was added to the list in September 2006 and dropped in February 2007. Microsoft was added to the list in June last year, which means it was a Goldman favorite about twice as long.) All of these companies, like Microsoft, face competitive pressures. They are also all likely to be around for quite some time generating profits for investors.
Second, Graham's use of the term "dead" to describe Microsoft was calculated. If you read his essay you'll see that what he means by dead isn't what the rest of us mean by dead, prompting him to write an addendum. I think he's well within his poetic rights to use "dead" this way, and he makes excellent points in his essay. But if he's surprised folks responded to "dead" instead of the meat of his argument, he shouldn't be. Hyperbole attracts attention, which is why he used it.