Microsoft (MSFT): Nice company, mediocre investment

this genteman does not mention whether or not he has a position in msft-----could he be short the stock?????

ED, Thankyou very much for the reminder! Sometimes I forget clear disclosure. I am neither long nor short MSFT, I have no position now and never have. If you have some idea about MSFT valuation, please share it.

Well, my guess is that the stock will trade between 25-30 for a while. Remember that MSFT's is still controls big market of the desktop. In addition, they are still doing great with MS Office, which is another cash machine.

In addition, MSFT has a lot of other products including XBOX, MSN and etc. These other products and service are not generating huge profit but they are making MSFT some money. In my opinion one of thise additional products will be big hit and that will move the stock to 40s and 50s. Remember, Apple had great success mainly because IPOD. Who knows, Zune may be the next IPOD. But the fact is they will need another killer product/application to move the stock up.

fundamentally I believe that the financial reports support the value of the stock. As to the stock price, I do not have any logical explanation, but lacking any fundamental reason for the share price could it be mainly the number of shares outstanding that is keeping it low? Would buying back large amounts of shares cause a more positive pschology toward the stock??

If msft could cut the number of outstanding shares from 10.6B to 5.0B what would happen to: EPS,Div,PE, etc...,and share price?????

Microsoft Vista Discounts: Bad For Business
Stocks: (MSFT)(DELL)(HPQ)(GTW)

There were rumors several weeks ago that Microsoft would offer discounts to anyone who bought a computer after Thanksgiving of this year so that they could upgrade to the new Vista OS when it comes out in 2007.

Now, The Wall Street Journal reports that Microsoft is once again looking at vouchers for people to upgrade if they buy a computer between now and the Vista launch. Computer retailers are worried that customers will simple wait for Vista before they buy new computuers, foregoing the upgrade discount altogether. Dell, Gateway, HP and others have to be sweating now that there already weak sales could be slammed again over the 2006 holidays.

Microsoft has some substantial risk here as well. It has disappointed the computing public by pushing Vista back in the spring.

At a recent analyst dog-and-pony show, Microsoft said that it thought that Vista would account for $14.3 and $14.5 billion during the company's fiscal 2007. Any further delay, or deep discounts for upgrades could put hundreds of million of dollars at risk, at least during Microsoft's upcoming year.

Microsoft has had a small rally over the last couple of months. It has risen from $21.46 to $25.55 since early June. A 19% rise is a big move for a company with a $257 billion market cap. The rise has been fueled by statements at the big software company that they now understand that the internet has to be a big part of their software distribution business and that other products like Xbox are doing better.

But, Microsoft's OS business is where it makes it operating margins. And, a delay in Vista, or a perception that discounts for upgrade might hurt revenue could send the stock back toward $21.

Sheldon,
I'll agree with you about Microsoft's stock. It's been dead money or worse for years. I think this will continue. But, I will give you a few reasons to buy MSFT now. MAYBE they will come out with a new product or new idea that takes off (we all know what the ipod did for Apple).Or MAYBE they will wise up and start paying better dividends. Also I think at this point in time MSFT has little downside risk, the company seems to be trying to fix a support level for the stock. I believe they will buy back stock whenever it approaches that $22 level and they got plenty of cash to do it. This makes it a good defensive play or hedge for someone who is shorting the market. If the market tanks I think MSFT will hold up better than most stocks, and if the market shoots up, I think MSFT rises with the tide.
As for those silly shareholders, maybe they believe in the "buy & hold" theory. After all weren't they told to "buy stock in good companies and just hold them, in the long run they will outperform other investments." lol.

Great comments and analysis! I owned MSFT back in its' heyday-made EXCELLENT money then, wouldn't touch now. Terrible return, lot's of promise, no execution. Weak management!! "Follow The Leader" Marketing approach, "Me Too" mindset. VISTA, Zune, are hopefuls but will take a miracle to unseat APPLE in their arena (well seeded) with a devoted audience already. May hope for Zune grand entry, however, the leader just may have their own trump card too!!!!

Hey Sheldon,

Glad to see you picked up on my comment on Brian's
post where many people hyped up the stock past $30. I also see MSFT stock range bound, not exceeding $30 for the short to mid-term, at least the
market has weighed in with 4 previous years of sub-$30 valuation.

If you didn't pick up on that comment, are we starting to think alike? Is that possible?

Cheers!

RE: MSFT. You ask why share price couldn't just as easily fall to $19. Employees get stock as compensation and incentive. The company won't let the share price fall, because that would be too damaging to morale. Leading technology companies have leading stock values. I think getting it up is a high priority and you will see the company giving its stock price some blue pills. By that, I mean they may not be able to move the needle much earnings growth-wise, but they will pump the stock price all they can.

MR GATES------------REDUCE SHARES OUTSTANDING,REDUCE SHARES OUTSTANDING,REDUCE SHARES OUTSTANDING,RED...............ETCETC

Why doesn't the Fed and politians understand the plyte of the common working person??? We cannot spend at Walmart, Sears, Home Depot!!!! There is nothing left! Gas, interest rates, taxes. We the people have nothing left to give. We have been under
the effect of inflation for the past 3years. Gas 1.69 to 3.25gal. interest on the same loan $275mo. to $475mo. This is all been driven by the FED's interest rate hikes, plain and simple. We have had to cut savings, we can't go out to eat, my handicapped daughter has had her state and federal services cut. You say your raising interest to try and curb inflation, what bunch of bull! Your keeping the banks and financial institutions happy and absolutely killing the american consumer. You wonder why home sales are suffering. No one has anything to spend. Its not just me, everyone on the street is echoing the same thing. Doctor, Dentist.Optometrist, worthless health insurance with rediculous premiums. The Government would rather stick its head in the sand than help the American Public. Hydrogen was proven a "safe" and reliable source of energy back in the early 1970's. Yes I said 1970's. It is as safe to use as your back yard BBQ grille. And yes the technology has been available for years!!!! We have Big Oil protecting Auto companies and the Government protecting both of them.

Galbreath--An impassioned, well reasoned post, spoken from down on the street, not THE STREET. Amen, brother. THEY certainly don't care about the little guy, or even the middle (class) guy, so.....maybe it will hurt the markets, but from a decency standpoint, I hope for the Dems to take over the House in November...