--Steve Ballmer

A while back, when Microsoft shares were trading in the mid-$20s, we used charts to predict they would eventually fall to $4 or lower. How could such a thing happen to a company with a product that dominates the software world, and with cash reserves totaling more than $20 billion? For starters, consider that Microsoft used to have twice that sum on hand but squandered a big chunk of it on investments that would make the guys at Bear Stearns look like visionaries. Also, they have not exactly enticed new customers in droves with the clunky Vista operating system. While the Redmond behemoth may have been able to ram this product down the throats of captive business and institutional customers, much as they have been doing for years with each new, gratuitously enhanced version of Windows, individual buyers have deserted the platform en masse. Just look around you the next time you’re at Starbucks: probably half of the computers one sees these days outside of the office and commercial airliners are Macs. The percentage is even higher at college libraries. These are tomorrow’s business users, and most of them wouldn’t use a PC if it were given to them free.

[...]

But the stake through Microsoft’s cold, monopolistic heart may be the new product announced last week by IBM –an office suite that runs on cheap :thin clients” connected to a backroom Linux server. IBM says customers will save $500-$800 compared to what they would spend to license Microsoft’s office suite, which includes the ever popular Excel, PowerPoint and Word. The savings would come not just from the software, but from, reduced costs for hardware, electricity and air conditioning.

Microsoft shares are currently down about 6 percent on the day, to $19.38.

What would a Microsoft earnings warning look like? For a clue, you have to go all the way back to December 2000, in the middle of the dot-com bust, which appears to be last time the company issued such a warning. It came out around the middle of the month, on Dec. 14, so if the past practice is any indication, any new warning could be a few days away.

Is Microsoft poised to join other tech vendors in announcing dismal second quarter earnings or is the company going to yet again manage to meet or beat its traditionally conservative guidance (this time against seemingly impossible odds)?

Microsoft issued a dire profit warning at the start of the last recession, in December 2000. Will the 2008 recession lead to another warning?

Morgan Stanley’s Adam Holt this morning notes that the company has not negatively pre-announced earnings since December 2000. But given that business conditions have deteriorated since the company last provided guidance in October, he thinks the company could come up short of its targets for the quarter, whether or not they give the Street advance warning.

The Softwear t-shirts seem like another directionless Microsoft move, much like the short-lived Bill Gates/Jerry Seinfeld ad campaign, which by the way, was voted the No. 1 bad commercial while Apple's "I'm a Mac, I'm a PC" ads were voted the No. 1 good commercial in Anderson Analytics' 2008 survey of 1,000 college students.