The Microsoft Investor is a daily report from SAI. Sign up here to receive it by email.
MSFT Falls In Weak Market
Markets are down in early trading despite solid retail figures for the month of January. Shares of MSFT are down over 1%, a much greater slide than the rest of tech. Upcoming catalysts include entrance and uptake in the tablet market (a ways off); Windows Phone 7 adoption (2 million units so far); strides against current market leaders in cloud computing; and continued momentum of Kinect as well as other uses for the technology. The stock currently trades at 9x Enterprise Value / TTM Free Cash Flow, inexpensive compared to historical trading multiples.
Tablets A Longer Term Threat That Microsoft Has To Respond To (Everything Gold)
With mobility being a strong part of technology focus at this time, it’s apparent the tablet trend should last for some time. In the short term, it seems the threat to Microsoft is being dragged away from future possibilities into an attempt to make it in the present reality. That isn’t the case. With Microsoft having over 300 million Windows 7 licenses sold, the relatively paltry sales of 7 million iPads in the last quarter doesn’t seem so scary. But, that doesn’t mean the long term threat isn’t real, as it is, and Microsoft will have to respond to that threat before it gets too far out of hand.
Google And Microsoft Exchange Words Over Search Allegations (Bing)
The war of words between Google and Microsoft continues. Google accused Microsoft of copying search algorithms. In order to set the record straight, Yusif Mehdi (SVP of Microsoft’s Online Services Division) denied that remark and accused Google of click fraud. Matt Rosoff at Business Insider says this is not new news; Microsoft has been copying the code for years. Dan Frommer believes that if it makes Bing a better search engine, it’s a brilliant tactic. Overall, the people who search will never read these articles and don’t care where their search results come from as long as they are accurate.
Nokia Needs Windows Phone 7 Says Analyst In Open Letter To CEOs (All Things Digital)
Nokia and Microsoft need to join forces to avoid the dinosaur fate of mainframe makers, Berenberg Bank analyst Adnaan Ahmad wrote in an open letter to the CEOs of the two companies. While an interesting, albeit unoriginal, idea, it has its merits. Microsoft gets access to Nokia’s massive global market share and Nokia gains the ability to go to market with an OS that isn’t a joke. That said, while Microsoft is certainly a valuable ecosystem partner, it’s not yet all that valuable in the mobile space. That’s where Android would be a better pick.
Don’t Retire On Microsoft Stock (The Motley Fool)
Now more than ever, a comfortable retirement depends on secure, stable investments. Unfortunately, the right stocks for retirement won’t just fall into your lap. When scrutinizing a stock, retirees should look for; size, consistency, stock stability, valuation and dividends. Microsoft has enough risks to put it out of the top tier of retirement-ready stocks. It’s not a terrible holding by any means, but if you keep looking, you can almost certainly do better.
Microsoft Selling Debt To Hopefully Use For Stock Repurchases And Acquisitions (Bloomberg)
Microsoft plans to sell 5-, 10- and 30-year debt in a benchmark offering. The company may issue the senior unsecured notes as soon as today. Benchmark sales are typically at least $500 million. Proceeds may be used for working capital, capital expenditures, repurchases of capital stock and acquisitions, the company said today in a regulatory filing that didn’t specify the size, timing or maturity of the sale. Why not just use the cash on hand?