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Down/Flat With Market
Stocks are down this morning on disappointing data for January retail sales, and a bigger than expected increase in U.S. import prices . Shares of Microsoft are marginally down to flat. Upcoming catalysts include several events speaking engagements this week (World Mobile Congress today and the Goldman Sachs Technology and Internet Conference tomorrow); entrance in the tablet market; Windows Phone 7 adoption with new partner Nokia; strides against current market leaders in cloud computing; gaining search market share with Bing / Yahoo! partnership (see below); and continued momentum of Kinect. The stock currently trades at 9x Enterprise Value / TTM Free Cash Flow, inexpensive compared to historical trading multiples.
Microsoft Will Have A Hard Time Catching Up On The Developer Front (Barron’s)
Sanford Bernstein analyst Toni Sacconaghi surveyed a dozen application developers writing for iOS and Android to find out why those two platforms have the most support (other than the obvious). The big picture is that it takes “45% incremental effort” to port an app from one of these mobile operating systems to another; meaning “platforms beyond iOS and Android will continue to be challenged to develop meaningful developer support.” Not great news for Microsoft and Nokia.
Microsoft Not Giving Up On Search, Takes 1% Away From Google In January (eWeek)
Microsoft Bing notched 13.1% search share through January, taking 1% from Google which fell to 65.6% according to ComScore. Bing enjoyed its greatest single-month boost since its inception in June 2009. Together, Yahoo and Bing make up 29.2% share, the closest the companies have come to Google combined. Piper Jaffray analyst Gene Munster said he viewed the stats as bad for both Google and Yahoo, if Bing continues to gain on its new partner, and he also highlights that Microsoft won’t give up on search. Read more about Experian Hitwise search results as well.
Could Microsoft Go Out Of Business? (Seeking Alpha)
Not likely, but not entirely implausible either: What if Google’s Android operating system was able to penetrate the never before challenged PC market, like some are predicting. Just going by progression, Android started on the smartphone, then on to the tablet, the next step would be tablet to PC. Regardless, at this point in time, would you rather be on the outside looking into the smartphone market, like Microsoft, or on the inside looking out at a potential PC market share, like Google?
Xbox Schools The Competition In January Sales (CNet)
The video game industry was hit quite hard by slow sales in January, and Nintendo and Sony might bore the brunt. Wedbush analyst Michael Pachter estimates that Microsoft sold 380,000 Xbox 360 units in January, besting the rest of the market and rising 14% over last year. He believes Nintendo tallied 320,000 unit sales in January, down 31% year-over-year and Sony once again came in third place with 240,000 PlayStation 3 units, down 13%.
Microsoft Buys Nokia For Nothing (Apple Outsider)
This pretty much sums it up: “So in the span of one year, we have Microsoft failing to acquire Nokia, ‘losing’ a top executive, and now having one of the most recognisable mobile hardware vendors in the world under its thumb. There’s no question that the next generation of flagship Windows Phones will come from Nokia, and for that, Microsoft will have unprecedented influence over the hardware that runs its software. We like to think of Steve Ballmer throwing chairs when his executives leave. I think this time he told Elop, ‘Fine. Go get me some hardware I can own.’ Elop did.”
Microsoft Needs Apps To Win In The Cloud (InformationWeek)
Microsoft’s business applications strategy is fragmented and incoherent; it’s a mish-mash of small- and mid-sized business focused products. The company needs to push higher into the predictive analytics space and make data intelligence pervasive in all applications. And those products should all be able to leverage Azure (cloud computing offering). Microsoft needs to make a decision if it is in the applications business or not.
Daily Trader: Buy Microsoft Against The Grain (The Street)
Marek Fuchs tells Microsoft traders that the company isn’t Nokia and the stock should not be down on the partnership news. Microsoft basically managed to buy Nokia without having to actually pay for the company. Yes, it’s a long time to market but the downside for Microsoft is limited and contained.
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