Even with a market cap over $300 billion, there is still upside for Mister Softee to show growth and increase profits for the next couple of years, courtesy of the Vista upgrade cycle. Why is Vista so important? Vista enables new and easy functionalities for the consumption of audio and video, new ways of networking, new ways of going back and forth between two computers, new ways of controlling content, and new ways of publishing to the Internet. While these are small, incremental changes, they improve the OS and empower the end user and add up to the Vista cycle that I argue, will be much bigger than anyone realizes because those little incremental improvements add up to hitting a tipping point of an increase in the functionality for the end user. When I talk about Microsoft as a stock, I am talking about it as a cyclical play, not tied to the economic cycle necessarily (though the economy is good right now), but rather the Vista cycle. I want to own Microsoft for the Vista cycle, simply because everyone on the Street believes that Vista will fail to deliver. A month ago, Microsoft rolled out its Vista enterprise edition, a market that they have long dominated and should continue to dominate for the foreseeable future. The consumer edition of Vista just hit stores, and while Microsoft has also dominated this market in the past, I believe that they will start running into problems over time with Apple taking market share. Because the market has not discounted a Vista boom, if Vista turns out to even slightly better than expected, the Street will award it. You always want the market to think you are stupid if you own a stock.

The iPhone. Are we about to hit an iPhone cycle? About 90% of the analysis I've read is fawning, breathless, and frantically trying to find out which companies supply the device. While this widespread acclaim over the iPhone may well be justified (it looks like the coolest device to hit the market in a long time), and it probably will be a huge product for Apple, the market has already seen it and is excited for it. Even with all of the excitement, the market has not actually seen any results yet, so it is not discounting results, instead it's discounting anticipation. Results could be bigger than anticipation, but from that pure sentiment/trading perspective, I don't think that Apple is a good trade right now on the long side. This is especially true when coupled with the fact that I think Steve Jobs is going to get in a lot more trouble for lying to people like me who owned Apple's stock before the options backdating scandal was discovered. Overall, I don't like the risk/reward setup in Apple from a short term trading perspective because so few people think it is stupid to own Apple right now. So why don't I sell it? Well, from a 3-5 year perspective, Apple has a lot of product cycles that are going to be hitting, which will drive the stock up.

What is the single best way to invest in all the products that were unveiled at Macworld and CES? With everyone on Wall Street already out trying to find out who supplies the iPhone and iTV or just buying Apple stock, I believe we can break from the herd and profit from all the new consumer electronic products with Google, a stock I covered in the first edition of The Cody Report. So how can consumer products affect a company whose main product is advertising via a search engine? The answer is that all of these new products empower and enable consumers to access content on the Internet. The iPhone, for example has Apple's Safari browser built in, so how will you find anything you are looking for on the Internet now? Google. How will you search for content to watch on Apple's iTV? You're going to Google it. It's all about accessing content on the Internet and publishing content to the Internet, and with everything that is happening now, Google is the biggest beneficiary of it all.

What is the single best way to invest in all the products that were unveiled at Macworld and CES? With everyone on Wall Street already out trying to find out who supplies the iPhone and iTV or just buying Apple stock, I believe we can break from the herd and profit from all the new consumer electronic products with Google, a stock I covered in the first edition of The Cody Report. So how can consumer products affect a company whose main product is advertising via a search engine? The answer is that all of these new products empower and enable consumers to access content on the Internet. The iPhone, for example has Apple's Safari browser built in, so how will you find anything you are looking for on the Internet now? Google. How will you search for content to watch on Apple's iTV? You're going to Google it. It's all about accessing content on the Internet and publishing content to the Internet, and with everything that is happening now, Google is the biggest beneficiary of it all.

As one of the two major suppliers of DRAM (the real-time memory storage for all computers) in the market, Micron is positioned well to benefit from the Vista upgrade cycle. While Vista may lead to secular growth of DRAM, Micron faces problems with pricing, and will not benefit as much as other component suppliers. This pricing problem comes from the fact that DRAM has become a pure commodity product; there's nothing proprietary in DRAM to speak of. While Micron certainly does have certain proprietary processes in manufacturing DRAM, the technology itself is a total commodity, so the margins are not going to be as high. Similarly, according to some of my sources, which I don't know to be completely accurate yet, Micron has also gotten into another commoditized product by supplying Apple's iPhone camera module. So I look at Micron and I see a cyclical play that I want to own for the Vista cycle and for the iPhone cycle. These dual cycles should be hitting over the next few months, and Micron should benefit from them both. To read more about The Cody Report go to TheCodyReport.net.

Ah, the Adobe. Infamously known for the PDF and Acrobat, the bane of your existence. So why do we want to own Adobe? Two reasons, first Adobe has a cyclical aspect to it, its Creative Suite, which is used in all kinds of publishing applications, and its advertising technologies, especially web-based graphical advertising are similar to the Windows and Office cycles in that Adobe releases a new version every couple of years. A new Creative Suite is coming out during the second quarter of 2007. Each new version has driven revenue as customers upgrade to take advantage of improvements to the software. Intensifying this cycle the past year has been the fact that while most of Adobe's customers use Apple computers, Apple's recent introduction of Intel CPUs has led many of Adobe's customers to upgrade their computers to the new chips. Upgrading to the Intel chipsets forces consumers to upgrade or replace Adobe software to run on the new Intel machines. Secondly, and most importantly, Adobe has secular growth from its Flash media player, which has become the de-facto standard for distributing video content on the Internet and is supported by nearly 99% of all web browsers. Each of the over one million videos that are played on YouTube.com everyday is delivered using Flash, and as I've said before, we are only in the first inning of the online video revolution. Since Adobe already has reached critical mass with Flash, it is a safe bet that it will continue to grow this business for some time to come.

With it's $580 million acquisition of MySpace.com in July 2005, News Corp made a bet that it could leverage the Internet to grow their business and drive profit. Doing a quick check of the math, it is obvious they were correct. How much does it cost to build the content on MySpace? Almost nothing, since everything is user-generated. How much does it cost to distribute the content on MySpace? While certainly more than they spend creating content, the Internet allows News Corp to distribute that content for a fraction of the cost of any other distribution channel out there. Next, how much does it cost to host the content on MySpace? While certainly one of MySpace's largest costs, data hosting costs are continuing to decrease, costing a fraction of what it once did during the dot com boom of the late 1990s. So how has News Corp generated revenue from MySpace? Shortly after its acquisition, New Corp signed a $900 million dollar deal with Google to provide search and advertising on MySpace and other Fox Interactive Media sites. Reviewing the math, and it seems to me that News Corp has already paid for MySpace with hard cash two times over. Is the market discounting that? I don't think so yet, I think that MySpace is still growing gangbusters with tremendous secular growth ahead of it. Also, it is not as if MySpace will remain only a social network or that it was the last online property News Corp will ever develop or buy.

I guess the best strategy for thinking about Intel and AMD is to not over think Intel and AMD. Founded by semiconductor pioneers Robert Noyce and Gordon Moore, who developed Moore's Law, Intel has traditionally owned the semiconductor business. For the past thirty-three years, Intel, and AMD have kept pace with Moore's law, which states that computer processing power will double every eighteen months while the cost to produce these faster chips will drop in half over the same time period. In 2004, both Intel and AMD began experiencing diminishing returns trying to keep pace, and for a time each fell behind. Both companies got back on track, however, with the introduction of the dual core processor, and have since brought us the quad core. Though inventory problems still exist, with Vista rolling out, most computers will have to be replaced in order to run the improved operating system. So don't over think Intel and AMD, they are cyclical plays on the Vista upgrade cycle.