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MSFT Moves With Struggling Market
The markets are mixed on Thursday as Bank of America gets a cash infusion from Warren Buffett and as Steve Jobs steps down as CEO of Apple. Shares of MSFT dipped into the red, erasing opening gains, as did the rest of the tech sector. Upcoming catalysts include the company’s Analyst Day at its new developer conference (BUILD) on September 14; Windows Phone 7 / Mango rollout and adoption with hardware partner Nokia (see below); strides against current market leaders in cloud computing; any entrance in the tablet market; making money in the online business, including integration of Skype and improving the search / display business; and continued evolution of Kinect and next generation Xbox console. The stock currently trades at 7x Enterprise Value / TTM Free Cash Flow.Microsoft Partners With China’s Social Networking Site, Renren (Reuters)
Chinese social-networking site Renren signed an agreement with Microsoft’s MSN to cooperate in areas of instant messaging and social networking. It’s also a great integration sell for Skype at some point. The two companies provide universal login access to both platforms and cross sharing of photos and status updates. Microsoft’s choice of Renren as a partner may suggest Facebook is unlikely to make a significant impact in China anytime soon.
It’s A Hard Time To Be A PC Maker, And That’s Not Good For Microsoft (Business Insider)
Windows 8 could turn out to be a great tablet operating system. But without great hardware, it won’t make a dent in the tablet market.That could be a real problem for Microsoft as PC makers struggle with the onslaught of the iPad, which has eaten about 11% of the PC market in a little more than a year. Acer posted is first ever quarterly loss while HP is exiting the business. Who’s going to take on Apple? Because Microsoft and Intel can’t do it on their own.
INQ Looking To Diversify Mobile Operating Systems, Looking Into Windows Phone
London-based mobile manufacturer INQ is openly discussing the possibility of pulling away from Android post Google’s buyout of Motorola. While the firm, which has released a number of Android based devices since 2009, isn’t advocating a wholesale withdrawal from Google’s OS, CEO Frank Meehan said INQ is looking to reduce its reliance on the platform moving forward. The company is seriously considering Windows Mobile. Great news for Microsoft. Now, if some others can follow suit.
The Server Business Continues To Be Strong For Microsoft (Digitimes)
According to IDC, factory revenues in the worldwide server market increased 17.9% year-over-year to $13.2 billion in the second quarter of 2011. This is the sixth consecutive quarter of on-year revenue growth, as server market demand continued to improve around the world. Microsoft Windows server demand continued to show strong growth as Windows-based hardware revenues increased 12.4% this year. Quarterly revenues of $5.9 billion for Windows servers represented 45.5% of overall quarterly factory revenue and 71% of all quarterly server shipments.
Daily Trader: Investors Are All About Microsoft (Seeking Alpha)
Back up the truck.
- Time For Conservative Investors To Look At Tech: Microsoft has grown earnings by 11% per year since 2006, and the dividends have grown by 21.5% per year, from $0.34 per share in 2006 to $0.64 today. Microsoft is trading at less than 10x earnings, which seems incredibly cheap. At current levels, you could buy into Microsoft at a 10.9% earnings yield. If you think that Microsoft will grow at an annual rate greater than 10%, you should do quite well.
- 14 Undervalued Mega Caps: Microsoft is a good medium term investment. Its cash cushion limits the downside as well as enables it to make opportunistic acquisitions if the valuation is attractive. Microsoft is also taking new initiatives which can drive meaningful growth over the next few years. Some of the major catalysts for the stocks are the Windows 8 launch, Office 365 gaining traction and a successful launch of Nokia-WP7 phones.
The risk reward might just be there.