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Linn Energy, LLC Message Board

  • rlp2451 rlp2451 Nov 17, 2012 9:57 AM Flag

    OT: How Is MSFT Doing?

    Seems as though somoene was touting MSFT when it was $29 - $30. I don't follow the stock, what is it doing now?

    Sales of Windows 8 PCs are well below Microsoft’s internal projections and have been described inside the company as disappointing. But here’s the catch: The software giant blames the slow start on lackluster PC maker designs and availability, further justifying its new Surface strategy. But Windows 8’s market acceptance can be blamed on many factors.

    Microsoft confirmed Windows 8’s weak start this week. And with all of the drama surrounding Windows 8 and the recent, unexpected departure of Windows chief Steven Sinofsky, rumors are sure to swirl. But looked at logically, some trends emerge.

    Microsoft blames the PC makers. The PC makers’ “inability to deliver,” a damning indictment that explains why the firm felt it needed to start making its own PC and device hardware.

    While Steven Sinofsky was removed from Microsoft because of his divisiveness and his ostracizing of far too many valuable executives and employees, many will continue to wonder if some failing in Windows 8 (and Windows RT) is what in fact led to his ouster. The timing on his departure couldn’t be worse, and while the promotion of his closest lieutenant, Julie Larson-Green, was clearly designed to promote the notion of orderly transition, the fact that she wasn’t made president of the Windows division hints at more changes to come. One of Microsoft’s many problems under the Sinofsky regime was that it wasn’t at all transparent: Its current lack of transparency about the succession plan for Windows is just as problematic because it makes those outside the company distrust anything they say. This lack of trust will cause consumers to look elsewhere.

    It’s the economy, stupid. Microsoft launched Windows 8 at a time of great economic uncertainty and midstream in business deployment of the product’s predecessor, Windows 7. It doesn’t take a tech analyst expert to know that businesses are simply not going to deploy Windows 8 in great numbers. And while that’s obvious, it also means that only consumer acceptance of Windows 8 can possible help this release match the success of its predecessors. But consumers have plenty of choice these days, and many are quite comfortable stretching out the next PC purchase and using a companion device, like an iPad or other tablet. The problem is, they may discover that’s all the computer they need and simply opt out of Windows going forward.

    Confusing range of device types. Faced with a reimagined, touch-focused Windows that is more at home on mobile devices than traditional PCs, and responding to increasingly hysterical pleas from Microsoft to innovate more, PC makers attempted to do in hardware what Microsoft did in Windows 8’s software: Create hybrid devices that could serve all needs. Unfortunately, the result is a mess of different hybrid designs, rather than a concerted, industry-wide effort to consolidate around a few basic designs. The result is obvious: Confusion, both on the PC maker side—where different companies are pushing a variety of different design types—and with consumers, who simply don’t know which, if any, device types to make. I love Lenovo, but consider this one PC maker’s designs: The firm is selling traditional laptops and Ultrabooks, touch-based laptops and Ultrabooks, “multimode” convertible laptop/tablets (the Yoga line), a traditional convertible Ultrabook (ThinkPad Twist), slate-type tablets (ThinkPad Tablet 2), slate-type tablets with keyboard docks (IdeaPad Lynx), and then a related but separate line of Android tablets. And that’s just the portable computers.

    Windows 8. It’s a floor wax. No, it’s a dessert topping. Microsoft’s new whatever-the-F-it-is operating system is a confusing, Frankenstein’s monster mix of old and new that hides a great desktop upgrade under a crazy Metro front-end. It’s touch-first, as Microsoft says, but really it’s touch whether you want it or not (or have it or not), and the firm’s inability to give its own customers the choice to pick which UI they want is what really makes Windows 8 confounding to users.

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    • I wonder if Mr. Norris saw this report today?

      Citing the NPD numbers released Thursday, showing a 21% decline, year over year, in PC sales in the four weeks through November 17th, Johnstone writes that this is the beginning of a sharp drop in PC sales through the beginning of next year as the market waits for better hardware:

      Given that Microsoft’s PC manufacturer partners (such as Hewlett Packard) may not have a full range of new Windows 8 tablets and notebooks until mid-2013 and significant competition from smart phones and tablets, we expect global PC unit sales to decline sharply in the first half of calendar 2013.

      Johnstone is predicting a 15% drop in PC revenue this quarter, following last quarter’s 33% decline.

      While Microsoft’s tablet computer, Surface, may somewhat offset that, it comes with lower gross margin than software products, causing Johnstone to cut his numbers. He reduced his fiscal 2013 estimate for Microsoft’s “Windows & Windows Live” division revenue to $17.4 billion from $19.87 billion, an 8% year-over-year decline. That lowers his annual EPS estimate to $2.90 from $3, which is roughly in line with the Street’s $2.88 per share.

      Our revised PC estimate results in a $1.45 billion reduction in Microsoft’s gross margin to $59.5 billion. If Microsoft sells 6 million Surface tablets in fiscal 2013 at an average price of $775, the company could generate $4.65 billion in tablet revenue (offsetting lower PC revenue), with tablets contributing $1.35 billion in gross income.

      • 1 Reply to rlp2451
      • Actually the Surface sales have been abysmal. Companies are not making capital investments thanks to Obama confirming his win means four more years of economic insanity. But safety from Obama insanity is a big part of the appeal of Microsoft.

        Yet despite it all if we take a $2.90 earnings the PE is nicely below 10 or an earning yield of 10%+.
        Fact is the office software suite is not going away and neither are the gains in Enterprise software.
        Payout ratio is about 30% but even smaller verse true free cash flow. 3.5% dividend yield most likely to grown 10%+ through the Obama time then we can have a enterprise capital investment cycle. Keeping in mind when a company is this cheap dividend growth can be sustained by share repurchases. Nor are software revenues going away.

        If it gets down to $26 I will buy some more.

        Under Graham and Dodd we look for a margin of safety. Line hedging and low cost of production. Microsofts utility business in Enterprise software

        That said Microsoft execution has once again been abysmal. But it is no crash and burn.

        Things will be fine when this dreadful Obama normal is over in four years.

        Current dividend yield 3.5% * (1 + 10%)^4 = 5.1%

        Maybe Microsft management finally earns they pay and breaks into mobile. But that is upside not down side from here.

        BUt really as I maintain a diversified and very defense portfolio right now, why are you so excited about MSFT? I like the rails a great deal at these prices too. Obama cannot be our President forever. So I am adding.

        That is what is great about dividend growth investing.

    • Another tidbit:
      If Windows 8 is going to give the PC industry a much-needed lift, Microsoft (MSFT) has some convincing to do. Though 6 out of 10 respondents to a U.S. poll done by antivirus software firm Avast said they're aware of Windows 8, only 9% said they would speed up plans to buy a PC because of it, and 74% said they'll probably stick with what they have. Moreover, about a third of Windows users ready to buy a PC said they plan to switch to an Apple (AAPL) product.

    • WOW seven responses yet I can only read one since I have ol' Blustermouth on Ignore. I must have really rattled his cage with this one! Mucho entertainment for someone this morning!

    • Yep I have been buying even more.

      The forward PE is now 8 PEG is 1 on very low expectations.

      3.3% dividend in all likelihood going to grow double digits for many years.

      Board base of enterprise software productivity tools which are growing stronger.

      PCs are no longer home entertainment. 80s high tech is now just cyclical industry. No one is expecting a capital investment cycle with the Obama 'victory'.

      I know the delusion of the Progressive mind is a firm belief that the future can be known or really controlled. Truth is proven by research that there is no method to predict short term share price movements to a degree a profit can be made.

      But the truth is it is now a better deal than it was. Certainly higher return and less risk that treasury bonds.

      All this negativity this morning. The OLB is as always negative and irrational.

      Maybe we should consider MSFT relative performance to the market in this developing Obama correction? ;-)

      • 1 Reply to norrishappy
      • Today, those old rivals Microsoft MSFT -0.53% and Apple AAPL +0.39% both look like inexpensive stocks.

        Microsoft could be the better value. Not only is it cheaper than Apple relative to its earnings per share, but Microsoft's business also has greater strengths, and better prospects, than the market appreciates.

        Granted, when these two have gone head-to-head in the past, Microsoft has come off worse—in tablet computers, music players and smartphone software. Apple desktops and laptops also have gained market share in the past decade, albeit from a small base.

        Microsoft for the past decade also has paled in comparison as an investment. Someone who invested $10,000 in Microsoft stock 10 years ago and reinvested the dividends would have about $13,000 today, according to FactSet. The equivalent figure for Apple would be $700,000.

        But today, Microsoft's prospects look better than its market valuation reflects. And while Apple stock also seems reasonably valued, its business is more vulnerable than many realize.

        "Apple is a super company currently making supernormal profits from very high market shares in markets it created with truly super products," says Steve Russell, chief investment officer of London-based investment firm Ruffer & Co., which has $20 billion under management. But that "marvelous situation" won't continue forever, he says.

        Microsoft is the opposite, Mr. Russell says, "a so-so company making OK profits with nothing expected to change. But they are currently launching a key set of new products that might just change all this."

        Microsoft's strengths include a broad range of "sticky" products—ones users are reluctant to change. Windows operating systems provide about a quarter of revenue, and business software such as Office about a third. Another quarter of sales come from servers; the rest, from Xbox computer games and other sources.

        Now Microsoft is introducing its Office suite of products—Word, Excel, PowerPoint and the rest—to a new market of touch-screen tablet users.

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