Breakout

Dot-Com Do-Over; Microsoft is Headed Back to 1999 Levels

Breakout

Ever since 30 year old Bill Gates took his company public in 1986, the image of technology companies and expectations of their CEO's has never been the same. Sure, Microsoft (MSFT) has had its ups and downs along the way, but today it's on the rise again, reinventing itself and looking for a new leader who will take it back to the glory days of yore and its all-time high of nearly $60 share hit in 1999.

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There's only one thing in the way of that, says Microsoft bull Cole Wilcox of Longboard Asset Management; the company's image.

"The perception is that it's not a sexy business," Wilcox says in the attached video. "Ultimately you have a big divorce between the market's perception of Microsoft and the economic reality of what's going on."

While this $300 billion behemoth would have to nearly double from its current level to reach Cole's long-term target price (and its own high water mark) of $60 a share, he thinks it not only can do it, but can do so without the meddling and prodding of activists.

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"All you really need is the market and Wall Street to have a perception change in terms of having a negative view, and the death of PC negatively affecting Microsoft," he says, adding that whomever succeeds outgoing CEO Steve Ballmer will have an easier time of it.

"It's much easier for fresh eyes and a fresh perspective to come into a company," he says, without the burdens of so-called legacy issues that can hinder an executive who has spent a lifetime on the job.


"I think the company is executing really, really well in their enterprise business," he points out, but thinks the new leadership will have an easier time making "radical structural changes that are needed."

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To be sure, Microsoft is driving sell-side analysts crazy this year, two-thirds of whom are neutral on the stock despite its 35% year-to-date gain. And that doesn't include the company's now above average dividend, which still carries a 3% yield even with the shares higher.

Ultimately, Wilcox says, Microsoft's second coming will be the result of revaluation, once investors get comfortable owning it again, or maybe too uncomfortable not owning it.

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