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MSFT Off In Shaky Market
Shares of MSFT are flat today as the market tries to process less than stellar economic news out of Europe. The stock got a shot in the arm yesterday as rumours indicated a dividend hike. Upcoming catalysts include upgrade cycles of Office 2010 and Windows 7; any entrance into the tablet market; the launch of Windows 7 mobile; any adoption of Azure (cloud computing); and gamer reaction to Kinect. The stock currently trades at 8x Enterprise Value / TTM Free Cash Flow, inexpensive compared to historical trading multiples.
Wall Street Chimes In On Mr. Softie (Various)
Various rumours out yesterday sent the stock soaring:
- Morgan Stanley analyst Adam Holt has slashed its estimates for Microsoft citing weakening consumer PC demand. He is in a line of a handful of other analysts who cut estimates last week with similar concerns. At 10x he believes the stock can still work over the near-term given accelerating mid-teen organic EPS growth in fiscal 2011 and a 2.2% dividend yield. He continues to rate the stock Overweight and has a price target of $30.
- Standpoint Research initiated on Microsoft with a Buy rating and a price target of $29. While many research firms have tried to pick a bottom on MSFT during the last four months, Sharepoint admittedly is trying to do the same. And the timing couldn’t have been better given rumours surrounding a debt sale for an increased dividend and share repurchase program.
Microsoft Could Issue $6 Billion Without Hurting Debt Rating (Bloomberg)
rumours swirling yesterday indicated that Microsoft is planning to sell debt this year to pay for dividends and share repurchases. The reason for the sale is because too much of its cash is held overseas, according to reports. The company would try to raise as much as it can without jeopardizing its debt rating of AAA which puts the issue at about $6 billion.
New Halo Launches Today As Microsoft Tries To Reverse Lackluster Game Sales (Reuters)
Microsoft is hoping to reverse the recent slump in video game sales and kickstart the holiday shopping season as it launches the latest version of its blockbuster Halo today. The game has sold more than 34 million copies grossing over $2 billion in sales. The company is said to be planning more Halo game spin-offs. The company’s motion sensor control, Kinect will ship in November ahead of the holiday season as well.
Microsoft Gearing Up To Use “White Space” TV Spectrum (Market Watch)
A study commissioned by Microsoft estimates that the unlicensed white spaces spectrum could be worth more than $100 billion over the next 15 years. Clearly an expansion of Internet access will mean increased use of Microsoft services and technologies. That is why Microsoft is gearing up for the introduction of powerful, new wireless Internet networks to be deployed on unused television airwaves. With the sinkhole that is their Internet business, this is likely just a drop in the bucket.
Microsoft Launches CRM System With Cloud Capabilities (Seeking Alpha)
Microsoft announced a global beta of Microsoft Dynamics CRM. The product appears to be heavily promoting cloud capabilities, one of the major threats to Microsoft. This is positive for two reasons: release continues to advance very tight integration with Microsoft Office and that Microsoft views the threat of the cloud very seriously and has taken steps to position its product in a way that can attract customers.
Ballmer’s Tenure Putting Cap On Executive Mobility (Reuters)
Another Microsoft executive has hit the eject button. Stephen Elop is the latest executive to quit. He will now take over the ever-so-fun job of turning around Nokia as the company’s new CEO. Microsoft may have developed a problem of holding onto top executives with ambitions. Does this mean that Microsoft is no longer the an exciting place to work in technology? Perhaps Ballmer is not expected to give up his office any time soon, effectively putting a cap on upward mobility on his top lieutenants.