Microsoft (MSFT)

The current introduction of a large cycle of new products (Vista OS, Xbox 360, Windows Live, AdCenter) makes it likely that Microsoft will see significant earnings growth for the next year or so, as companies upgrade their older systems.

Pristine balance sheet and the company is still a cash cow. It increases dividends and the P/E is at historic lows

Msft has hit a double bottom and will begin to go up

http://blogs.barrons.com/techtraderdaily/2011/01/24/msft-oppenheimer-mcadams-say-buy-ahead-of-thursdays-report/

Earnings Watch -- Microsoft (MSFT) will report earnings on Thursday, after the markets close, and a few folks are putting up previews today. The Street consensus for Thursday’s report is $19.15 billion and 69 cents EPS.

Microsoft hasn't released a stable, widely-adopted operating system since Windows XP. Most corporations have not moved their server operating systems past XP yet, due to overall security and stability reasons. Windows 7 is a solid operating system that will be implemented in corporate IT infrastructure in the coming years, furthermore, it integrates with Office 2010 and Microsoft Server 2008 R2; completing the transition to full 64-bit.

Windows 8 will gain adoption via mass sales through existing retail channels. Anybody that wants a new <$800 laptop will have one over the next few years.

Microsoft (Nasdaq: MSFT) might be king of computer software, but Google (Nasdaq: GOOG) has it beat in the search engine department hands down. Just as it sought to take on Apple Inc. (Nasdaq: AAPL)’s iTunes craze through Zune, a musical database and mp3 player of its own, it is once again not content to merely dominate its own significant market.

Currently, Microsoft ranks an unimpressive third in the search engine world, a position it’s hoping to leave behind with Kumo.com, which it’s testing now. Though the tests are being conducted privately - most likely to build up suspense before the big unveiling - we do know that it utilizes semantic technology that enables it to go further than either Google or its competitors have previously attempted.

If Microsoft can succeed with the trial, it will be launching the first search site with the ability to “understand” sentences and relationships between words. That differs from the much more iffy method currently used, where Internet surfers type in keywords that are then matched with content on websites and the larger world wide web.

Anybody who has ever done a Google, Yahoo, MSN or Dogpile search can all attest to the following: Sometimes it works wonders and sometimes it doesn’t work much at all.

According to Microsoft Live Search general manager Mike Nichols, in an online message to the curious, “There’s a good deal of excitement brewing over this test, both internally and externally, which we’re always glad to see. Our hope is that our employees will give us great feedback on our new features and that it all becomes part of the external experience soon.”

No word of a release date is yet known, but techies and those of us who are just plain intrigued are eager to see what comes out of this latest move on Microsoft’s Part.

Many individuals and businesses are waiting for this new version to upgrade their current Windows XP. When it rolls out, it should have an immediate impact on the bottom line.

And as much as MSFT has been trying to diversify around the tech segment, including video games and browsers, software is still their main bread and butter.

Win 7 should give us a good indicator for the strength of Microsoft. If it does well, you’re sure to see headlines like “Sleeping Giant Wakes Up,” and Microsoft Back in the Game with Win 7.”

With stiff competition from players like Google in search engine arena and Nintendo and Sony in gaming Microsoft has been trying harder than ever to improvise on its products and is successful in doing so. They have come a long way from releasing sloppy products in the market and the company is repositioning itself as a strong technology leader with "diversified focus".

The current introduction of a large cycle of new products (Vista OS, Xbox 360, Windows Live, AdCenter) makes it likely that Microsoft will see significant earnings growth for the next year or so, as companies upgrade their older systems.

They have also just announced the release of the new Zune named the Zune HD, which will be available in September. It stands to be a serious iPod competitor.

The newest version of their OS which will be called Windows 7. Is now in beta and has been getting raving reviews from critics.

Whatever flaws Microsoft may have in its business model or management, it is dangerous to conclude that because it is cumbersome, the company will fade away

They are always capable of buying solutions as in Hotmail and the clumsy offer for Yahoo. They are always capable of overwhelming the marketplace with their shear mass and momentum

Yes, of course, over time their dominance may erode as other more capable entities capture the imagination of the marketplace, but there are many corpses which litter the landscape as Microsoft persevered. A few that come to mind are Netscape and IBM's competing operating system for the pc

Microsoft (MSFT) this morning announced a rough 2nd fiscal year quarter (MSFT Earnings Release). Revenues came in at $16.6 billion and EPS was 47 cents a share - both below analyst expectations of $17.1 billion and 49 cents a share.

In addition, they announced a planned net headcount reduction of 2,000-3,000 over the next 18 months, including 1,400 today (they employed 91,000 as of June 30, 2008). They’ll also be implementing other cost cutting measures to reduce expenses in a tough economic environment. They aren’t giving guidance for the second half of the year but said that revenue and earnings will “almost certainly” be lower than last year.

The stock is getting torched, down 10% on pretty good volume. At these levels, shares are already priced for a severe recession.

The stock is trading just above $17 and Microsoft has $2 of net cash and short term investments on its balance sheet. You get the business for $15. They earned $1.88 over the last 4 quarters for a trailing multiple of 8. Even if earnings drop by 10% over the next year, that’s a 9 forward multiple.

That is cheap for the leading company, with essentially a monopoly on operating systems and business software, with a fortress balance sheet, paying a 3% dividend. There just isn’t too much more downside for Microsoft here even given the harsh economic environment.

1. They can afford to, plenty of cash on hand, take a look at the balance sheet!!!! 2. Store accessibility makes them visible to consumers, it will improve public perception. 3. Store leasing will be the lowest they have ever been following the sub prime meltdown. 4. Will be able to expand on their consumer PC market. 5. Dividend increases every year. 6. No debt. 7. Fortune 500 companies will not switch from Microsoft to another provider. 8. They will introduce their first computer. 9. Hired David Porter, a 25-year Wal-Mart veteran to be in charge of retail operations. 10. New products will be presented to consumers within MSFT's environment and their own version of genius bar.

thevoice@voicedup.com / voicedup.blogspot.com

Microsoft reported that in 2008 it sold more XBox 360 consoles than ever before. This follows the trend that, despite a poor economy, people are still buying video game consoles and video games; video games sales rose 10 percent and totaled $2.91 billion in November.

http://www.pcmag.com/article2/0,2817,2337880,00.asp?kc=PCRSS03069TX1K0001121

Microsoft exports many of their products overseas. The weak dollar will help solidify their income through foreign markets.

"U.S. retail sales of video game hardware, software and accessories jumped 10 percent last month from the year-ago period to $2.91 billion, boosted by strong sales of Nintendo Co.'s Wii, Microsoft Corp.'s Xbox 360 and the alien shooter game "Gears of War 2."

http://tech.yahoo.com/news/ap/20081212/ap_on_hi_te/video_games_sales

Today,

1. they sell Operating systems for home and servers (They entered the business later than Novell and IBM but today they compete mostly against the *nix flavors and Apple),
2. they sell the XBOXes that are the most powerful game consoles, at present, beyond the PS3 (they entered the business later than Sony and Nintendo but caught up to the competition),
3. they are #1 in Office products. The Open Source competition lacks the feature-laden products to compete for customers who desire all the bells and whistles
4. they are #1 in Internet browsers market share
5. they increase their market with IIS/Windows Server against the Open Source solutions and they should become #1 in 2010 (source not provided yet)
6. they are #1 in the mobile market. Their mobile OS is by far superior than the the others, especially in enterprising and third-party applications department.

These successes across diversified markets are demonstration Microsoft is sufficiently sensitive to the needs of the market. They are willing to sustain long-term investments, providing improved solutions large segments of the market are willing to embrace.

Microsoft's unique position of stacked offerings promises greater compatibility and integration for demanding enterprises, from the OS up through the server applications. This makes an all-Microsoft system an attractive buy, and the desire to maintain maximum integration also persuades many companies to upgrade all their Microsoft products together.

Microsoft's near-monopoly on the desktop operating system market gives it tremendous pricing leverage as well as a steady cash flow. This domination of the desktop OS makes it easier for name-brand Microsoft to penetrate new OS markets like those of mobile phones, PDAs, mp3 players, digital cameras, and car navigation computers--Microsoft has both a technological advantage of extensive OS experience and an advertisement advantage with its reputation for high-quality OS offerings.

Microsoft is currently undertaking new branding exercises. According to Adweek.com they are bidding out a $50M account to 4 agencies. This was originally reported to be a $200M account, and is not replacing any existing marketing initiatives.

There is a big shift coming to corporate computing to remote desktop computing. MS is at the front of the pack on making this happen for corporate.

All their Office apps and corporate communications functions are now fully integrated into very thin client technology. For large scale users such as gov't and business, Dell and HP will see declining price points (if that's possible) in the next 5 yrs - Apple alone will still survive the desktop wars through brand loyalty.

The cloud will become the standard for corporate computing - not the standalone desktop operating system. For MS in its current focus, this means continued dominance and a deep hook into Google's slice of the pie. Remember: Windows 7 was developed in months by a very small team of highly empowered programmers. The new Microsoft.