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MSFT Off In Weak Markets
Markets are falling in early trading as spiking bond yields in Spain and other European worries offset unemployment benefits falling to their lowest level in 7 months. Shares of MSFT are down with the rest of technology. Upcoming catalysts include Windows 8 late next year; entrance into the tablet market; Windows Phone 7 / Mango rollout and adoption with hardware partner Nokia; strides against current market leaders in cloud computing; making money in the online business, including integration of Skype and improving the search / display business; and continued evolution of Kinect and next generation Xbox. The stock currently trades at 7.0x Enterprise Value / TTM Free Cash Flow.
A Nokia Windows-Based Tablet To Be Released Next Summer (paidContent)
Paul Amsellem, the head of Nokia France, has confirmed that the company is expecting to launch its first Windows-based tablet. Amsellem stated, “In June 2012, we will have a tablet that runs on Windows 8.” The Windows 8-powered machine has been hinted at throughout the year, but this is the first confirmation that the (as-yet-unnamed) device actually exists. This is not the first time that Nokia has referenced making a tablet. CEO Stephen Elop, has made a number of references to a device but never given details on when one might emerge.
Nokia Going Against Other Windows-Based Phones Too (Reuters)
Nokia plans to undercut its Windows Phone rivals to give its new smartphones a foothold in the market before trying to improve margins, said CEO Stephen Elop. The key to Nokia’s Windows Phones success is by moving a lot of units. Which means, they are not only up against Apple and Google, but all Windows platform phones which are used by rivals Samsung and HTC. I would imagine it makes no difference to Microsoft which phone a user buys, but a Nokia phone would validate (ROI) the partnership / investment.
For Some Reason Microsoft Is Testing A New Social Network (The Verge)
Late to the party as usual, Microsoft is testing a new social service called Socl. The world doesn’t need another social network, but it’s an attempt by the company at creating its own version of Facebook and Google+. Screenshots suggest the site pairs a Facebook-like social feed with Bing search functionality, while enabling users to tag specific topics so the content can be quickly searched for at a later time using keywords. I can’t imagine Facebook is all too pleased considering Microsoft is a major investor.
Xbox Turns 10 Years Old! (Pocket-lint)
Back in 2001 the gaming landscape was pretty much dominated by PlayStation 2 and the Nintendo 64. There were a few new kids on the block hanging on the horizon, namely the Xbox. It was arguably miles ahead of the competition in terms of power, it looked different and was the first foray into consoles from Microsoft. The X in Xbox, it originally stood for DirectX. The console started life as a mish mash of parts gleaned from Dell computers by Microsoft employees. Known as the DirectX box.
The Tablet Market Continues To Explode Tripling In Size This Year Alone (PC World)
Juniper Research released a report Tablets, Viva La Evolution! which estimated that tablet shipments will increase from 17.6 million tablets in 2010 to 55.2 million this year (this is shipments, not units sold). The company predicts that the tablet market will explode over the next five years, with shipments reaching 253 million units in 2016. That’s more than 4x what they are today. Additionally, 67 million e-reader devices will be sold in 2016, as compared to 25 million this calendar year. Nokia / Microsoft better hurry and get to market.
What Is Microsoft’s True Intrinsic Value? (Seeking Alpha)
Microsoft is one of the most undervalued stocks in the market. Let’s look at different historical valuation metrics:
- Price-to-earnings: Historically, Microsoft has traded between 10-18x earnings. It’s currently trading below that range.
- Price-to-cash-flow: Microsoft traded between 8-24.5x operating cash flow over past five years. Using a conservative multiple of 12x puts the stock at about 45% above current price levels.
- Price-to-sales: The last half decade, Microsoft has traded in a range of 2.4-6.8x sales. As the company is growing revenues just under the 7.7% annual average, a median value of 4.5x would put the stock at 42% above current levels.
Investors are missing the turnaround in Microsoft’s business prospects.