THE MICROSOFT INVESTOR: Microsoft Not Concerned With Managing Escalating Mobile OS Expenses

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Photo: AP

MSFT Up With Market
Stocks were in the negative this morning on the higher than expected initial jobless claims report, and following down trading of European indices. The market is currently recovering trading along the flatline. Shares of Microsoft are up about 1%. Upcoming catalysts include any 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 Sees A 3-Percentage-Point Boost In App Development Activity; Goes From Nothing To Nothing (Bloomberg)
Microsoft Windows Phone 7 operating system has lured an increasing number of application developers since the software maker announced a partnership with Nokia, according to analytics firm Flurry. In the four days after the deal was announced, 4% of new app projects started were for Windows Phone. Underwhelming, but not as bad as Blackberry with 2%. iOS was the platform of choice for 69% of apps started in the same period with Android coming in a distant second at 25%.

Microsoft Ad Exec Jumps Ship After Only 9 Months To Go To Partner Facebook (All Things Digital)
The brain drain continues to flush Microsoft as Facebook has scored the software giant’s Head of Global Advertising, Carolyn Everson. She will become VP of Global Sales at Facebook and will likely be based in New York. The move will surely cause some tensions as Microsoft is not only a prominent partner but an investor in Facebook as well. To add insult to injury, Everson was only hired at Microsoft last June after a long search. And she sees huge upside in online video advertising.

Microsoft Betting On SMB In The Cloud (The Wall Street Journal)
Kurt DelBene, president of Microsoft’s Office Division said businesses with fewer than 50 employees make up about one-third of the buyers of its Business Productivity Online Suite (BPOS) product. DelBene, an 18-year Microsoft engineering veteran, is at the forefront of blending applications and communications into new offerings for the cloud, the central scenario his team now designs for. In terms of competition from Google Apps, he thinks they are a bigger consumer player. Matt Rosoff at Business Insider finds one business customer who doesn’t agree.

Chief Financial Officer Says Microsoft Will (Has To) Keep Costs In Check (Bloomberg)
Microsoft will keep a rein on costs even as the company spends to boost products including its mobile-phone operating system. When asked about analyst estimates that have expenses growing faster than revenue next fiscal year, Microsoft CFO Peter Klein said the company hasn’t changed its investment philosophy and will “prioritise spend” to focus on opportunities for the most return. That’s funny. Didn’t the company just incinerate more than $500 million in online losses this past quarter alone?

Daily Trader: Microsoft Is A Long-Term Hold With Warnings (Seeking Alpha)
Investors don’t invest in Microsoft for the short-term. However, when you look at a chart going back 10 or twelve years and more, it is meaningful to note the large changes in stock price: from 2000 to 2002 the price dropped from $45 to $18, that’s nearly 60%, from 2007 to 2009 the price dropped from $34 to $15, that’s close to 55%. Investors should have serious concerns regarding holding Microsoft for the long-term.

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