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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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Who did not know this was coming
By atlmann10 on 4/30/2011 12:10:23 PM , Rating: 2
Microsoft it seems to me. I was told personally by someone in the company several things about there strategies concerning Slate/Tablets, and smart phone strategies supposedly in place. I told them they were making a bad decision from what I could see. Of course I have been saying that for years personally.

They seem to feel they are fine where they are at, or did a couple of months ago when the information exchange took place.

Microsoft needs to have a Tablet windows out yesterday, and while they have done considerable work on there smart phone, and Slate market and interface they have not done enough.

I find it disheartening really as Microsoft as a company has generally been pretty gung ho about offering new technologies. They seem to be at best lagging in many areas for at least the last 3 years.

While they may have been fine in R&D in several sectors, with an organization as big as M$ you expect more as well as better vision for the future.

I predict if they don't get something moving, and I don't mean somewhat, I mean moving hard and fast, that they will loose share. I say that because with quad core processors, and advanced graphic capabilities moving quarterly in the mobile arena that they do not and are not covering heavy, they are at best unprepared.

On top of that they seem to be refusing to recognize this in many ways. Yes the just grabbed a big piece of Nokia which may very well help them significantly in the future. That is doing nothing for at least 12 months. That in the current market is a long time really.

RE: Who did not know this was coming
By Targon on 5/2/2011 8:25:55 AM , Rating: 2
Apple not releasing a new OS in ten years does not seem to have hurt it as a company, so Microsoft isn't doing too bad when it comes to new releases. It is fairly difficult to make significant changes to products when you need to keep compatibility with applications as well.

By michael2k on 5/2/2011 11:45:15 AM , Rating: 2
Apple updated their OS every 18m or so, released a new OS in 2001 (Mac OS X) and a second new OS in 2007 (iOS), the second of which they update three or so times a year with major improvements.

So it's not like Apple is sitting still. Microsoft released XP in 2001, Vista in 2006, and W7 in 2008, a much slower pace than OS X's 6 revisions in the last decade, or iOS's four revisions in the last four years.

"Google fired a shot heard 'round the world, and now a second American company has answered the call to defend the rights of the Chinese people." -- Rep. Christopher H. Smith (R-N.J.)
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