Print 54 comment(s) - last by Smilin.. on May 2 at 1:21 PM

Eroding Windows sales is hurting the stock price at Microsoft

Microsoft is the largest software company in the world and there is little to indicate that it will cease being the biggest gorilla in the cage anytime soon. Although profits at Microsoft were up and were greater than Wall Street expected, the company has seen its stock plummet and sales of its Windows operating systems are sagging. 

Microsoft offered up the financial details for its latest quarter yesterday. According to the numbers, Microsoft's Windows division saw sales of Windows 7 OS slide. This is attributed in part to the sagging PC sales that were down 1% in the same three month time period compared to a year ago. When PC sales sag, so do sales of Windows since the vast majority of PCs shipped run Windows in some flavor.

At the same time, some of the blame for sagging Windows sales and slowing PC sales is attributed the popularity of other gadgets and devices like the iPad. The iPad and other tablets are encroaching on the PC market in a noticeable way and many feel that trend will only grow.

As a result of Windows losing momentum in the marketplace and uncertainty of PC sales Microsoft has seen its stock price fall 1.2% to $26.37 in trading reports Reuters.

Capital Advisors Growth fund Channing Smith said, "Microsoft to me is no longer a growth stock, but it is a very attractive value stock. They continue to generate tremendous free cash flow. Their balance sheet is really unmatched." He continued, "What you will begin to see is a shift away from growth investors. You are seeing that transition where Microsoft is in no man's land, but I think they will become increasingly more attractive to value investors."

Over the last year, Microsoft's stock has lost 14% compared with an overall growth of 16% for the Nasdaq. While Windows slipped, other segments of Microsoft's business did well and took up the slack. Overall, net profit at Microsoft was up 31% in fiscal Q3 to $5.2 billion amounting to 61 cents per share. After excluding the tax benefit Microsoft profits still met analyst expectations.

Standouts for the quarter included the Office Division which saw a 21% increase in sales to $5.2 billion, and the Entertainment and Devices Division relied on the Xbox 360 and Kinect to rack up $1.9 billion in sales.

The much talked about deal for Bing to provide search results on Yahoo is still not performing as Microsoft had hoped with the division posting a loss of $726 million.

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We'll just have to wait...
By MrBlastman on 4/29/2011 11:05:43 AM , Rating: 2
And see how the partnership with Nokia pans out. I'm betting it will as Microsoft has too much riding on it.

It isn't as if they don't have a mobile operating system solution. They've been leaders in it for years--it hasn't been until recently they have faced intense competition through Android and iPhone OS (yuck).

So, I think it is too early to stick a fork in them. They have tremendous amounts of net income being generated and if you really dig in, you'll notice over the last year despite there being a great deal of negative cash flow, the majority has been moving towards "investments" of sorts.

I'm willing to wait and see if they can pull it off.

RE: We'll just have to wait...
By Smilin on 4/29/2011 11:39:41 AM , Rating: 2
Don't forget that the smartphone and device market is still in it's infancy.

Nokia, Windows 8, WP 7, and all that are just tiny battles. The war will be in full swing in the days of Windows 11+.

As for the stock price: Look they don't need to raise cash. So long as it doesn't tank and they keep increasing dividents (up to 0.16 now) the investors will be content. They are also still buying up their own stock with spare cash so the bargain price actually helps them.

RE: We'll just have to wait...
By KoolAidMan1 on 4/30/2011 3:36:08 AM , Rating: 2
Android is absolute garbage. Windows Phone 7 has shown itself to be the first legitimate alternative to iOS.

It deserves to do well, we'll see.

RE: We'll just have to wait...
By mcnabney on 4/30/2011 9:54:33 AM , Rating: 2
What color is the sky in your world?

RE: We'll just have to wait...
By KoolAidMan1 on 4/30/2011 10:48:58 PM , Rating: 3
A world where people don't delude themselves into thinking that Google made a good mobile operating system.

"The Space Elevator will be built about 50 years after everyone stops laughing" -- Sir Arthur C. Clarke
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