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MSFT Up From July Lows But Still Off
Shares of MSFT have had a good run in September coming off of July lows but nowhere near the highs of earlier in the year. 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 9x Enterprise Value / TTM Free Cash Flow, inexpensive compared to historical trading multiples.
More Analysts Turning Bearish As PC Sales Head South (Barron’s)
Cautious notes out from the bulls:
- FBR Capital analyst David Hilal trimmed Microsoft estimates to reflect slowing PC demand. Weaker PC sales will likely result in lower sales for both Windows and Office. But he states that the PC refresh cycle will play out through 2011 as enterprises need to replace their ageing fleets. He reduced his 2010 PC unit growth estimate to 16%, from 20%. David reiterates his Outperform rating and $32 target on the stock.
- Oppenheimer analyst Brad Reback came away from a day of meetings with Microsoft management encouraged by the company’s strategy across its different segments. However, he believes the company, especially the PC and Office businesses, remains at the whim of the broader macro-malaise. Given the increasing headwinds in both the Windows PC and Office businesses, he believes that potential upside to our estimates over the near and mid-term is muted. Brad maintains his Outperform rating, but trims his target to $30, from $35.
Zune Launching Internationally, Why Is Another Question (The Wall Street Journal)
Microsoft is launching its Zune digital entertainment system overseas. The company aims to integrate the Zune system seamlessly across both its XBox live service and other Internet-enabled devices such as Windows-based PCs and smartphones. It’s going to be difficult for the company to make any headway here; no one uses Zune and I haven’t seen a Microsoft-based smartphone since 2003.
Halo: Reach Statistics Are incredible (Mashery)
More than 2,000 years have been spent playing the game in less than a week. 31,000,000 games have been played since the launch with 98,000,000 player games on record. Few games have been so profoundly influential as Halo. Its numerous sequels and spin-offs have generated billions of dollars and Halo: Reach is certainly no exception.
Google Apps Gaining Speed In The Enterprise At Microsoft’s Expense (Business Insider)
Given that only a small percentage of Apps users actually pay for it, it doesn’t look like Google is going to turn enterprise into a revenue engine any time soon. But according to Nick Saint at Business Insider, the point of Apps isn’t to make money, it’s to eat away at Microsoft’s cash cow. Microsoft has already had to make concessions on price to fend off competition from Google, offering consumers a stripped down, ad supported version of Office for free via the web. If Google can keep adding users at this rate while pulling Microsoft’s prices down, Apps is doing its job.
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