Why Microsoft’s Only an Afterthought on Wall Street

By Wednesday, December 5, 2012

Microsoft’s Only an Afterthought on Wall StreetMicrosoft Corporation (NASDAQ/MSFT) is no longer the stock that Wall Street craved in the ’90s, when the stock price traded at a record high of over $58.00 in December 1999. That was then. In the 12 years since, the maker of the “Windows” operating system has fallen by over 50%, and the stock, once held in high regard by institutions and retail investors, has become a non-factor in the technology sector, based on my stock analysis.

The company, like many others in the PC-related market, is struggling with the sliding demand of personal computers (PCs), as tablets accelerate in popularity, based on my stock analysis.

Revenues are estimated by Thomson Financial to grow 9.1% in fiscal 2013 and 8.4% in fiscal 2014. My stock analysis is that these growth metrics pale in comparison to the new era of technology growth stocks, such as Google Inc. (NASDAQ/GOOG), which is estimated by Thomson Financial to grow its revenues by 42.6% this year and 25.0% in 2013. Facebook, Inc. (NASDAQ/FB), which is trying to convince the market that it’s the real deal, is slated to grow revenues at 35.0% and 28.9%, respectively, for 2012 and 2013. The reality is that Wall Street wants growth and Microsoft is not delivering, according to my stock analysis.

There was some guarded excitement over the recent launch of Microsoft’s “Windows 8” operating platform for PCs, tablets, and smartphones. The company was betting on its new “Surface” tablet to take some market share away from market leader Apple Inc. (NASDAQ/AAPL); but so far, this doesn’t seem to have any chance of materializing, based on my stock analysis. (Read more about Apple in “What’s the Matter with Apple?”)

According to NPG Research, sales of Windows PCs with Windows 8 fell 21.0% in the period from October 21 to November 17, compared to the same time in 2011. And to make matters worse, tablets with Windows 8 represented a mere one percent of all Windows 8 device sales. Microsoft, which was so positive on its Surface tablet, has reduced the production of the tablet by a whopping 50% from the initial four million units to two million. (Source: “Microsoft Can’t Catch a Break: Tablet Sales ‘Almost Nonexistent’ According to NPD,” Yahoo! Finance via Business Insider, November 30, 2012.)

My stock analysis is that the same is happening with the Windows 8 smartphones. Microsoft has to convince smartphone buyers that the Windows 8 platform is superior to Apple’s “iOS” and Google’s “Android” platforms, which are the leaders, according to my stock analysis.

Microsoft’s initial entry into the hardware market with its Surface tablet is looking to be a failure; though it’s still early, I wouldn’t be betting my money on success with the product, based on my stock analysis.

While failure with its Surface and smartphones will not immediately mean the end of Microsoft, the company will need to go back to the strategy room, as continued declines in the PC market will hurt the company more, according to my stock analysis, and that could eventually mean another decade of futility for Microsoft shareholders.


About the Author | Browse George Leong's Articles

George Leong is a senior editor at Lombardi Financial. He has been involved in analyzing the stock markets for two decades, employing both fundamental and technical analysis. His overall market timing and trading knowledge are extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi Financial’s popular financial newsletters, including Red-Hot Small-Caps, Lombardi’s Special Situations, Judgment Day Profit Letter, Pennies to Millions, and 100% Letter. He is also the editor-in-chief of a... Read Full Bio »

  • vcfan

    You analysts are a complete joke. Your personal analysis is a joke. You don't know what you're talking about. I can't believe you get paid for your moronic logic and analysis. Who is even more moronic is who pays you. No wonder this country is in the shitter.

  • elzorro

    Add to that the ongoing revenue loss in the enterprise/public sector with companies and institutions moving to Linux-based platforms and clouds (just check the latest example of Barclays saving 90% of their IT costs by switching to cloud and linux), Microsoft is simply doomed…

Sep. 3, 2015
Trailing 12-month EPS for Dow Jones companies (Most Recent Quarter) $1014.15
Trailing 12-month Price/earnings multiple (Most Recent Quarter)

17.44

Dow Jones Industrial Average Dividend Yield 2.71%
10-year U.S. Treasury Yield 2.14%

Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.

Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.

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