Photo: Associated Press
MSFT down with the market this morning. The MSFT shares are down about $0.50 to just under $28 this morning as the overall market continues to get hammered by Europe concerns (and weak employment numbers this morning to boot). The stock has rallied over the past year with the Windows 7 release, but over the long haul, we think Microsoft is in a challenging spot, as the world moves away from PC-based computing toward cloud and mobile computing. The next major catalyst is Office 2010. MSFT currently trades at 14x 2010E P/E – inexpensive compared to historical trading multiples, but Microsoft’s rapid growth days are likely behind it.CIO Survey Indicates Accelerated Movement Toward Cloud And Virtualization Services, But It’s Not All Good For Microsoft (Morgan Stanley)
Morgan Stanely tech analysts surveyed 50 CIOs from large companies and, among other findings, revealed the following for the next year:
- CIOs plan to virtualise 55% of their production server environment next year, up from 42% today.
- CIOs intend to host email in the Cloud, indicating confidence in the Cloud to host critical applications.
- As a result of desktop virtualization, most CIOs intend to keep their PC spending flat next year while increasing server/storage spend.
This may seem positive for Microsoft since it offers cloud and virtualization products, but the report points out that the biggest beneficiaries should be EMC, Google, Rackspace Hosting and VMware. Microsoft is not a leader in most cloud and virtualization offerings. It needs to be if it is going to fend off competition for its flagship Windows product.
Yoshikami: Here Is Why Tech Is So Hot Right Now (CNBC)
CNBC contributor and Chief Investment Strategist for YCMNET Advisors Michael Yoshikami outlines the following reasons why tech is a hot sector right now:
- Drastic cost containment in the tech space during the credit bubble created a pent-up demand that has led to a strong burst in technology spending.
- Additionally, many companies are looking to upgrade their IT infrastructure in order to increase efficiency and productivity at all levels.
- Many companies in the technology sector have balance sheets that are solid, with large cash balances and relatively low debt.
This is all true. However, now investors have Europe and any spillover into the American economy to worry about. Tech is at the beginning of a recovery, but it could turn quickly if the economy shows signs of weakening again.
Microsoft BPOS Scores A Big Customer From Google Apps (ZDNet)
According to ZDNet’s Mary Jo Foley “Microsoft announced that systems integrator and consultancy Capgemini is making a major commitment to Microsoft’s Business Productivity Online Suite (BPOS).” Capgemini will still use Google Apps to some degree (it was a major supporter back in 2007), but BPOS will drive most of its enterprise functions. This is just one customer, but a good data point for Microsoft as it tries to get more aggressive with its cloud offerings.
Microsoft Is In A Number Of Different Patent Wars (Microsoft Watch)
Microsoft Watch’s Nicholas Kolakowski points out the many patent battles Microsoft is currently in:
- Salesforce.com for patents that cover “Method and system for mapping between logical data and physical data,” “Method and system for stacking tool bars in a computer display,” and “System and method for providing and displaying a Web page having an embedded menu.”
- VirnetX and i4i for patents covering custom X M L-related properties.
- “On April 27, Microsoft announced that it had reached an intellectual property agreement with HTC that will see the phone manufacturer licence Microsoft’s patented technology for use in its smartphones running Google Android.”
Of course, patent protection lawsuits are a cost of doing business in the software industry and are common.
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