Best of the Week
Most Popular
1.Will UK Interest Rate Rises Crash House Prices? - Nadeem_Walayat
2.Full on Crash Alert for Major World Stock Markets... - Clive_Maund
3.Gold And Silver Market Bottoming? Big Rally Imminent? Reality Check Says NO - Michael_Noonan
4.The Coming Silver Price Rally Will Outperform All Previous Ones - Hubert_Moolman
5.The Trigger For The Upcoming Stock Crash - Harry_Dent
6.Imploding Department Store Results - James_Quinn
7.Dr. Copper is Speaking, are you Listening? ... - Rambus_Chartology
8.Pandemonium in the Stock Market, Dow falls 1,000 points in a week - EWI
9.Asia's Whirling Dervish of Devaluations Has Encircled China's Exports - Keith_Hilden
10.China Weakens the Yuan; Rattles Global Stock and Financial Markets - Gary_Dorsch
Last 5 days
The Ultimate Cash-Management Guide - 27th Aug 15
Why a Fed Rate Hike Could Be a Blessing for Gold Prices - 27th Aug 15
Why Devaluing the Yuan Won't Help China's Economy - 27th Aug 15
Stock Market Trend & Trade Signal Of the Decade - 27th Aug 15
Keep Your Eye On the Gold and Silver Bear - 27th Aug 15
Refugees Expose Europe’s Lack Of Decency - 27th Aug 15
How to Profit from China's Currency War - 27th Aug 15
How China's Currency Policies Will Change the World - 27th Aug 15
Chinese Medicine not Impressing Dr Copper - 27th Aug 15
Novel Biotech Novel Technology Platforms with Dramatic Growth Potential - 27th Aug 15
China Stocks Bear Market Crash, Are We Near the Bottom Yet? - 27th Aug 15
Stock Market Crash Black Wednesday Rally Crushes the Bears - 26th Aug 15
VIX Shorts Being Squeezed While SPX Prepares for Another Decline - 26th Aug 15
Why China's Economy is Deteriorating - 26th Aug 15
Citizenship as a Weapon: Travel Controls and What You Can Do About It - 26th Aug 15
Gold and Silver - How To Manipulate a Market - 26th Aug 15
How to Make a Quick 20% When the Stock Market Crashes - 26th Aug 15
Why We Can’t Handle A Stocks Bear Market - State Budgets Will Implode - 26th Aug 15
Stocks Bear Market, Is This 1929 All Over Again? - 26th Aug 15
The One Trading Strategy You Needed for Stock Market Crash - 26th Aug 15
Second Chance To Buy Cheap Gold Mining Stocks - 25th Aug 15
Gold Facts and Gold Speculations - 25th Aug 15
The Stock Market Crash Season is Here… - 25th Aug 15
Liftoff Setback Leads to U.S. Dollar Pullback - 25th Aug 15
The Stock Markets Are Extraordinarily Volatile, Here's What to Do - 25th Aug 15
Israel: The Case Against Attacking Iran - 25th Aug 15
Saudis Could Face An Open Revolt At Next OPEC Oil Meeting - 25th Aug 15
How to Calmly Weather This Stock Market Downturn - 25th Aug 15
Stock Market Sound the Alarm - 25th Aug 15
Stock Market Meltdown - Dow Monday 1000 Point Crash then Rebound, What's Next? - 25th Aug 15
El-Erian: Stock Market Sell off Is Not 1998 or 2008 - 25th Aug 15
Gold the Ultimate Financial Crisis Insurance - 25th Aug 15
Stock Market Black Monday Crash Fizzles Out, Next Black Tuesday? - 25th Aug 15
Black Monday - Rolling A Wheelbarrow Of Dynamite Into A Crowd Of Fire Jugglers - 24th Aug 15
Playing the Chinese Trump Card - 24th Aug 15
Gold and Silver: Heading for a “Blue Screen of Death” Event? - 24th Aug 15
Japan Economy Clear Conclusions Concerning QE - 24th Aug 15
Stock Market Blockbuster Right From the Open... - 24th Aug 15
Silver And The Petrodollar - 24th Aug 15
Why the Stock Market Sell-Off Happened – and How to Make Money on It - 24th Aug 15
Stocks Correct, Panic Ensues. The End Of The World? - 24th Aug 15
Stock Market - The Sky IS Falling - 24th Aug 15
SP500, DAX, FTSE - When Stock Markets Talk, Pay Attention - 24th Aug 15
Stock Market Black Monday - Full Crash Alert! - 24th Aug 15
Stock Markets Implode as China Literally Explodes - 23rd Aug 15
Stock Market Bloodbath - The Feds Gonna Need A Bigger Balance Sheet - 23rd Aug 15
Stock Market Due For A Breather (But More To Go) - 23rd Aug 15
Stock Market 20% Bear Market in the Works - 23rd Aug 15
Ankara: the New Capital of Jihad, U.S. Policy for Strengthening ISIS - 23rd Aug 15
Will Rising Interest Rates Crash UK House Prices? - Video - 23rd Aug 15
Stock Market Primary IV Underway? - 22nd Aug 15
Gold And Silver – NWO In Its Element: Problem, Reaction, Solution. Beware - 22nd Aug 15
Stock Market Nirvana Has Been Broken - 22nd Aug 15
Three Ways to Profit from the Stock Market Correction - 22nd Aug 15
S&P 2040 Breaks Down... Stock Market Turns Bearish - 22nd Aug 15
Storm Clouds Are Gathering Around Peer-to-Peer Lending Sector - 22nd Aug 15
Crude Oil Price Crash Continues: West Texas Crude Below $40, Brent Near $45 - 22nd Aug 15
Pandemonium in the Stock Market, Dow falls 1,000 points in a week - 22nd Aug 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Global Stocks Slide

Is Microsoft Stock Price About to Break Out of Its 10-Year Slumber?

Companies / Microsoft Feb 14, 2013 - 03:59 PM GMT

By: Money_Morning

Companies

David Mamos writes: Microsoft Corp. (NASDAQ: MSFT) is the world's largest software company. It's also the world's largest afterthought for most investors.

"It's an ancient relic," they say, "Apple and Google are the only games in town."

Or there is always this complaint: "Microsoft has no attractive products and there is no growth"...blah, blah, blah.


This ongoing apathy is one of the reasons why Microsoft stock has been stuck in the doldrums for years.

But if you are willing to look a little deeper, you'll discover this sleeping giant is coming out of its long slumber - and it's hungry.

Don't get me wrong, I'm not going to try and convince you that Microsoft is ready to change its stripes and become a full-scale growth company. Microsoft is what it is - the seller of the market-dominant PC operating system, Windows, and the seller of the market-dominant workplace productivity software, Office.

However, it does have the potential to become a major competitor in future growth markets like smartphones, tablets and enterprise solutions.

The Key to Microsoft Stock
The fuel for Microsoft's future growth is the new Windows 8. It debuted in October 2012 and has sold a solid 60 million licenses so far.

In the long-term, the PC business will slow for Microsoft as the desktop and laptop market loses ground to the booming smartphone and tablet market. But this concern is no longer as much of a worry for Microsoft as it positions itself in this new environment.

Windows is practically the only choice in the PC market, with a combined market share of all PC operating systems of around 85%. Repeat, 85%! Microsoft also holds a 75% share in all operating systems across all devices.

So while there may be a slowdown in PC sales, we are very far away from the point where Microsoft's core business is considered dead. These users are upgrading to Windows 8 and getting accustomed to the new robust features and touch screen display. This increasing familiarity with Windows 8 is of utmost importance, and the reason why Microsoft is no longer as worried about slowing PC sales.

Microsoft will transfer this new Windows 8 familiarity to the smartphone, where it will soon launch its latest edition of Windows 8 in partnership with experienced hardware maker Nokia (NYSE: NOK) and its huge global reach. This partnership has already made significant strides with its current version of Microsoft's phone OS, especially outside the United States.

Many believe the new Windows 8 OS will take Microsoft one step further by putting it in third place behind the Apple iPhone and Google Android platforms. While third may not sound all that fantastic, it is when you think about how dominant the iPhone and Android are. Plus, smartphone and tablet sales are still rapidly growing.

According to comScore, Microsoft had only a 3.6% share of mobile devices as of September 2012. Microsoft's share of this market is unlikely to go lower but it definitely has the potential to head much higher.

Surface Windows 8 Pro
Now once more, transfer that knowledge and familiarity the user has acquired from using Windows 8 on a PC and put it in a tablet.

That is what Microsoft has done with its launch of the Surface tablet last quarter. The number of units sold was cryptically left out of the Q2 report, which does raise some red flags and probable weak sales.

But, the weak sales of the device were probably left out so as to not kill the buzz for this month's release of the company's second version of the Surface tablet, the Surface Windows 8 Pro.

Now why would Microsoft want to take on the iPad?

One reason is that the Surface Windows 8 Pro tablet is not just a tablet. It is also a full PC with a keyboard. If that's not enough to convince you, consider this: it will be the only tablet to run Microsoft Office. Aha!

Now is there a business out there that doesn't use Microsoft's Office?

Sure Google has it's free version, but is there really anybody who actually uses that in a professional environment? Microsoft holds a dominating 95% market share in the global productivity suite market. Any threat from a competitor is very low because Office is light years ahead of the competition and has an immense user base.

So now Microsoft has got you firmly in its clutches. You can get one Surface Windows 8 Pro to replace both your home PC and your tablet, and on top of that you can take it to work with you.
This jibes well with the BYOD (Bring Your Own Device) trend taking place in the office environment, where employees bring in a preferred device they already own and let the IT guys figure out how to integrate it.

To further cement people into Microsoft Office and make its presence more pronounced in cloud computing - Microsoft will launch Office 365 for corporations at the end of February. The idea is that the launch will go hand in hand with increased sales of Surface Windows 8 Pro tablets.

Then there's the recent deal with Dell.

Microsoft's Loan to Dell
Recently Microsoft agreed to give a loan of $2 billion to Michael Dell and partners in order to take Dell Inc. (Nasdaq: DELL) private. This loan will very likely give Microsoft influence over the kind of products Dell brings into the marketplace.

Microsoft, therefore, becomes much more like Apple, in that it will not only have control of its software but also have some control of the hardware. This type of strategy is a bit perplexing since it may alienate some of Microsoft's other partners such as Hewlett-Packard and Lenovo.

But, just like when you're watching a magician, you have to pay attention to what the other hand is doing.

Dell has substantial reach into the business world with its hardware; Microsoft has a strong imprint in the business world with its software. Put them together and you have a considerably sleeker and more efficient solution for IT managers everywhere. This efficiency will be most evident in the fast-growing and competitive cloud computing sector.

As more companies sign up for Microsoft-Dell enterprise solutions, expect more sales of tablets with Windows 8, more sales of Surface 8 Pros and more sales of smartphones with Windows 8. There will be a big advantage of having Windows 8 across all platforms - especially for business users. IT managers know the benefit of supporting only one operating system as opposed to the time and cost of supporting several different ones.

Still Don't Buy the Growth Story - How about Dividends?
It's understandable to think that Microsoft's explosive growth of many moons ago is gone, never to return again. However, if you are a blue chip investor there is a lot to like here.

Microsoft's earnings and revenues are for the most part steadily increasing, and the company continues to make the necessary investments to keep churning out strong performance results quarter after quarter.

The company has an A+ balance sheet by almost everyone's standards. It has nearly 30% of its $229 billion market cap in cash. It has a trailing P/E of 15 and a forward P/E of 8.7.

And here is the fun part; Microsoft is able to raise dividends yearly. The company's shares currently yield 3.4% with a 23 cent quarterly dividend.

Microsoft's share price has gone nowhere for the last 10 years, as the accompanying chart comparing Microsoft versus the S&P 500 illustrates.

Chart: YahooFinance

It neither participates in broad market rallies nor does it overly participate in market drawdowns - with one exception.

During the market crisis of 2008-2009 it seems as if portfolio managers sold the good with the bad when they sold Microsoft in order meet margin and capital requirements.

The share price quickly recovered to its normal range even sooner than the S&P. Therefore, the downside risk for the stock is, in my estimation, almost non-existent.

So, even if none of Microsoft's plans for growth work out, I'd be perfectly content with clipping my coupons quarter after quarter, without worrying much about a drop in share price.

And if Microsoft's new plan for growth actually starts panning out - where will the share price be then? I think you know the answer.

That's why I am a BUYER of Microsoft.

About the Author: David Mamos brings nearly 15 years of analytical experience to the table with a background ranging from big-picture fundamental analysis to highly technical trading decisions. He began his career working as a financial advisor with Royal Alliance in 2001 and helped clients with portfolio management as well as buy-sell decisions before transitioning to the development, implementation and execution of trading strategies for aggressive investors.

Source :http://moneymorning.com/2013/02/14/buy-sell-or-...

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History