the company is a cash cow that will make billions this year while most of the financial community is in serious trouble and would go bankrupt without government help and rust belt companies like GM face serious doubts about survival. The likelyhood that microsoft might ONLY make 5 or 6 billion dollars next year due to the economic slowdown world wide is hardly sufficient reason for the price per share microsoft is today.
I think a massive stock buy back now, and raise the dividend later. The stockbuyback would later reduce the cost of the dividend increase to the company. Both are necessary and a much better way to spend the money than acquiring Yahoo.
Good point, but these days there are a lot of stocks with a P/E of 5 and a dividend yield of 20%. By that measure, Microsoft is expensive. Have you ever heard "A rising tide floats all boats?" It looks like a black hole sucks all spaceships.
Disclosure - no position in MSFT
<The likelyhood that microsoft might ONLY make 5 or 6 billion dollars next year due to the economic slowdown world wide is hardly sufficient reason for the price per share microsoft is today>
1. MSFT the stock has been frozen @ $30 for almost a decade. Why should 2008 be any different?
2. Microsoft has grown to be as large as it can go. It's all downhill now.
3. Innovation-crippled. Not one original idea since Excel (oops that was copied from Lotus 1-2-3). Never mind.
4. Apple is cool. Microsoft is not and never can be.
5. Microsoft needs to give up reverse compatibility and make its OS safe.
6. Microsoft doesn't care about their customers since they all have the brain of a "spider monkey" according to Bill Gates.
7. Microsoft enjoys the perfect distribution system - bundling. Which their OEM are getting very very tired of. Ask HP about their Vista Upgrade package.
8. Microsoft doesn't have to be innovative. They have 90% captured audience.
9. Microsoft made a lot of people millions in the 1990's. Today $100 invested in 2001 in MSFT is worth about $100 (well maybe not this month).
10. MSFT the stock is about the equivalent of interest in a Checking Account - assuming the bank is still in business.
Here's the problem presently:
"Still, in order to tell this company's financial story properly, you have to dig deeper to see how each individual business unit performs. And each unit is expected to be flat or down sequentially from its fourth fiscal quarter. The company's client software is expected to be flat sequentially at around $4.38 billion; its server and tools business should decline to $3.45 billion, and will be watched very closely since it's a good proxy as to how broader business is faring; its online business, a sore underperformer, should decline to $718 million; its business division should decline to $4.73 billion; and its entertainment division could see a decline to $1.45 billion. Flat or declining business across the board for this Microsoft."
the market seems to love googles on line advertising market, Google is selling at over twice the p/e ratio of microsoft. I think Balmer is right,,,,just not at anywhere near the price Yang thinks Yaqhoo is worth.