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Meanwhile Ballmer looks to pump shareholders up with a letter emphasizing Microsoft's success

When a more mature Steve Jobs came back to Apple, Inc. (AAPL), he revitalized the company he co-founded as a rebellious youth.  Millions of iPods, iPhones, and iPhones later, Apple is the world's most valuable company in terms of market cap.  Meanwhile, Apple's perennial rival Microsoft Corp. (MSFT) is struggle not for want of user, but for a faltering brand image.  Some say that Bill Gates -- the man who founded Microsoft and drove it to its initial success -- should return.

I. Bill Gates: No Comeback for me

But at his keynote at the Abu Dhabi Media Summit 2012 -- a leadership conference -- Bill Gates all but ruled out a return, saying his focus was on his philanthropic work, and it would remain that way.  He said:

Steve Jobs did a phenomenal piece of work. Apple, most people would have expected, were on their way going out of business. He had run Apple since it was a tiny company and then he came back in and made incredibly valuable. It’s a phenomenal business story and I thought Walter Isaacson did a good job catching that in the book. Steve and I were friends, competitors – we were a lot of different things. It was amazing what he did.

I’m now committed full time to my foundation work and I give about 15% of my time as Chairman of Microsoft. Microsoft is moving ahead with Windows 8 that combines the best of tablet with PC. This month the very first hardware based on that idea including Microsoft’s own Surface will ship. So there’s a lot of exciting stuff ahead in software and I didn’t retire from Microsoft because I thought things were getting boring. In fact a lot of best ideas- the vision of artificial intelligence and robots are still ahead but i did decide the philanthropic world was where my contribution would be more unique and so thats what I’ll work on full time for the rest of my life.

Bill Gates
Bill Gates says "no" to a Microsoft comeback. [Image Source: Flickr/Bill Gates]

Some people will be disappointed that Mr. Gates is resisting a comeback.

II. Steve Ballmer: Microsoft is Strong

But Microsoft CEO Steve Ballmer is convinced no comeback is necessary.  He insists that the image that Microsoft lacks creativity is badly out of date.  In a letter to shareholders, he brags that 1.3 billion people worldwide use Windows and that there are 8 million active Windows app developers.

The boisterous chief executive is bullish on Windows 8 tablets and Windows Phone 8, bringing a unified Windows experience across mobile and traditional computing devices.  

Microsoft has skeptics aplenty, particularly when it comes to Windows 8.  But as Mr. Ballmer puts it:

For fiscal year 2012, revenue grew to a record $73.7 billion. We also maintained strong cost discipline resulting in cash flow from operations of $31.6 billion, an increase of 17 percent from the prior year. In addition, we returned $10.7 billion to shareholders through stock buybacks and dividends.

In other words financially Microsoft shows little sign of being a "dying" brand as some opinion pieces have claims.

Windows 8 is a huge risk.  But Steve Ballmer is convinced it will pay off, even as Bill Gates watches -- permanently -- from the sidelines.

Sources: T-Break, Microsoft



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RE: Fire Balmer
By OoklaTheMok on 10/10/2012 4:58:59 PM , Rating: 3
That chart is just about Market Value which is directly related to Stock Value. Stock value does not indicate anything related to the growth or performance of a company.

This chart doesn't indicate anything about the record income and profits, and overall business growth that has happened under Ballmer


RE: Fire Balmer
By Reclaimer77 on 10/10/12, Rating: -1
RE: Fire Balmer
By TakinYourPoints on 10/10/2012 5:14:31 PM , Rating: 3
The stock chart supports your theory only if you have no idea what you're talking about.

http://ycharts.com/companies/MSFT/pe_ratio

Go back even farther and the stock is even more overvalued.

Microsoft has been doing great if you look at their revenue growth. Taking this information into account, the real story is that Wall Street put way too high a price tag on MSFT back in the day. It is making more money now than ever but its market value has also been made fair, that's all that's happened.

You know what's funny? For someone that puts so much value on greed and selfishness, you sure know nothing about finance.

If you want to talk about expanding outside of the Windows/Office markets then the argument holds, but I'm actually not convinced that Gates would have done much better. The failures of the Zune and Vista (way too many people skipped this upgrade at a time when they shouldn't have) were under his watch as well, as were falling asleep at the wheel with the smartphone and tablet revolutions.


RE: Fire Balmer
By Reclaimer77 on 10/10/12, Rating: -1
RE: Fire Balmer
By TakinYourPoints on 10/10/2012 7:34:08 PM , Rating: 2
quote:
You keep trying to make Vista out to be some kind of failure, but I hate to tell you, it's one of the biggest hits Microsoft has ever had.


It wasn't as big as XP or 7. Compared to other versions of Windows it was an underperformer.

I personally liked Windows Vista, I thought it was fine after the first six months when it was patched up and third party drivers caught up. It is also clearly the basis of Windows 7, which is mostly a reskin of VIsta.

quote:
That's your opinion. Stock's cannot realistically be under or overvalued, since their worth is exclusively based ON the price of itself and no tangible good or resource.


No, there are actually hard metrics that are used to evaluate whether something is overvalued or undervalued.

You saying that what I am presenting as an "opinion" about Microsoft's stock price is like saying that it is my "opinion" that a Yonah Core 2 Duo is slower than an Ivy Bridge i7.

Stock price is partly the product of earnings and growth. Expectations are another factor, which factors into the earnings multiple (growth stocks have higher multiples, mature stocks have lower ones). Multiply earnings times the earnings multiple, currently 14.5, and that's the stock price.

If you bought Microsoft in 1999 when it had a PE of 75, that means that it would have had to grow profits at a rate of 75% every year for the next ten years it to make money on your return. That is impossible for a company of that size. Over the last decade the PE has dropped into a normal range as revenue has continued to grow. The stock has normalized and matured into a fair market value, despite the fact that their earnings have been on a constant upward trajectory.

A big reason why so many stocks flatlined over the last decade is because they were wildly overvalued around 2000. It has nothing to do with the inability to grow revenue, Microsoft has been doing a great job there. Microsoft is actually a solid buy right now, certainly more than it was back in 1999. Obviously they would have grown revenue even more if they could have broken through with phones and tablets like Apple or advertising like Google has, but those obviously don't play to Microsoft's core strengths.

In any case, your post is ridiculous. It is like saying that evolution is just a "theory" based on opinion, completely ignoring hard research and rigorous methods.

Don't use your personal ignorance as a basis for your arguments.


RE: Fire Balmer
By TakinYourPoints on 10/10/2012 7:47:02 PM , Rating: 2
As for revenue, at its peak in 1999 Microsoft made $20 billion. Last year they made $70 billion.

Again, Microsoft's flatlined stock price isn't the victim of poor performance, it is the victim of being insanely overvalued and getting adjusted down (or sideways) from that.


RE: Fire Balmer
By TakinYourPoints on 10/10/2012 8:49:59 PM , Rating: 2
*edit for clarification - "having been insanely overvalued", which it clearly was around 2000.

I think Microsoft has been a good value for a while. I myself picked up shares at 25 last year. Between that and a 3% dividend yield it is a solid and consistent investment.


RE: Fire Balmer
By paydirt on 10/11/2012 11:22:34 AM , Rating: 2
Ballmer has done a GREAT job with the core businesses of Microsoft; the acquisitions have been bad. He's doing just fine.

My hope is that they branch out Windows from here on out... Windows 8 for mobility (tablet phone), Windows 7 for desktop/laptop. Windows 7 is great for many people and I hope they keep some version of it going for a long time to come.


RE: Fire Balmer
By Reclaimer77 on 10/10/12, Rating: 0
RE: Fire Balmer
By TakinYourPoints on 10/10/2012 9:56:06 PM , Rating: 5
No worries, I expect you to wallow in your own ignorance and consider that a plus


RE: Fire Balmer
By Pirks on 10/11/2012 3:00:48 AM , Rating: 5
Wasting time on such an unedicated obtuse idiot as Reclaimer is a mistake. Better spend your time somewhere else. Talking to a piece of wood is more effective. Even the Swashbuckler is way more fun :)


RE: Fire Balmer
By Reclaimer77 on 10/11/12, Rating: -1
RE: Fire Balmer
By TakinYourPoints on 10/11/2012 4:11:31 PM , Rating: 2
This isn't about that, it is about improperly using a stock chart to try and prove a point. It is meaningless given that Microsoft had a completely bogus valuation when it was at its peak market cap due to the tech bubble.

They're making more money than ever, the only reason the stock has been flat is because it was just that insanely overpriced.


RE: Fire Balmer
By KoolAidMan1 on 10/11/2012 3:07:28 AM , Rating: 2
Takin dropped some serious knowledge here. Everything youve written is pathetic.

You got smashed, give it up


RE: Fire Balmer
By 0ldman on 10/11/2012 11:10:31 AM , Rating: 2
quote:
You keep trying to make Vista out to be some kind of failure, but I hate to tell you, it's one of the biggest hits Microsoft has ever had. They took Vista, and basically re-badged it as "Windows 7" fyi. There's literally no significant difference between the two.


Wow.

I don't believe you own a PC. You must either be posting this from an Apple or an Android.


RE: Fire Balmer
By Reclaimer77 on 10/11/2012 12:52:18 PM , Rating: 2
I'm typing this from a Windows 7 machine, so yeah, "wow".

Instead of more ad-homenium attacks, can you please enlighten me and list the major differences between Vista and 7 that would disprove my statement? There are none. They are virtually the same OS.

That's been the consensus opinion of the IT industry for years now. I just love when I state something, and people act as if they've never heard it before. Give me a break, get a clue.


"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA














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