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MSFT Flat In A Positive Market
The overall market is in the green, despite China’s interest rate hike report this morning. Tech stocks are trading sideways and Microsoft shares are flat. Upcoming catalysts include entrance and uptake in the tablet market (a ways off); Windows Phone 7 adoption; 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.
Ballmer Plans Executive Changes, Unfortunately, He’s Probably Not One Of Them (Bloomberg)
Steve Ballmer plans to extend a management shake-up aimed at adding senior product executives at Microsoft with an engineering background. Changes may be announced as early as this month. The move would expand on an effort to promote managers who have engineering skills and experience executing product plans; a Hail Mary to help Microsoft catch up with rivals in web services, smartphones and tablet computers. Read more from Matt Rosoff at Business Insider.
Microsoft Will Win In The Cloud On the Small Business Front (Forbes)
Big companies (Google, Apple and IBM) as well as small companies (Facebook and Groupon) are offering their services and applications online, changing the way people use technology. But quietly, Microsoft is adding more and more of its key applications to the cloud, winning over small business owners. These owners could find similar services elsewhere, which is why Microsoft will win. Because the battle won’t be won over products and features and cool apps and gizmos. The choice will be about companies and services and who users trust with our data and our business applications.
Microsoft Is An Exceptional Dividend Stock With Incredible Free Cash Flow (Seeking Alpha)
Microsoft is at a bit of a crossroads, but quantitatively, no one can argue that in the past and at the present, it is a phenomenal free cash flow generating machine. Operating cash flows have exceeded capital expenditures by up to tenfold in recent years. Combine that with a strong balance sheet and a low valuation, and investors might have a decent value stock on their hands. The question is, can Microsoft keep it up, or is the tech environment changing faster than Microsoft can adapt? Some statistics:
- Dividend Yield: 2.27%
- Five-Year Dividend Growth Rate: 12%
- Price to Earnings: 12.0
- Price to Free Cash Flow: 10.2
Whitney Tilson Extremely Bullish On Microsoft (The Street)
Whitney Tilson’s T2 Partners has been underperforming the market by a large margin due to its short positions in high growth companies such as Netflix and OpenTable. In January, Tilson bought additional shares of Microsoft and Berkshire Hathaway. He is extremely bullish about these two stocks. Tilson expects Microsoft to beat earnings estimates and reach $35 in 2011. Given the recent track record, not sure I agree. Read more on Tilson’s regrets and outlook from Insider Monkey.