Microsoft Corp (MSFT)

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The Company develops, manufactures, licenses, and supports a range of software products for many computing devices.

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Avatar PouyaZ (72.31) Submitted: 4/05/08 8:37 AM : Start Price: $28.92 MSFT Score: -5.23

Interesting chess match chess match between Microsoft and Yahoo.

Microsoft's revenue increased from $44.3B in 2006 to $51.1B in 2007, because the Zune division finally become profitable, Xbox 360/Live division flourished, and software sales. In term of software, people love to focus on Vista. True, it wasn't well received and illegal pirated copies exist, but it is still the second best selling operating system of all-time behind XP, Windows 7 is going to be released within the next couple of years, and Microsoft makes a lot of other software (such as Office) that also makes a lot of money. In addition, despite my prediction that (1) for gaming the PS3 will outsell the Xbox in 2008 and (2) for mobile OS, Google's Android and Apple's OS for the iPhone will start to take more marketshare, Microsoft is still going increase revenue at least through 2009 by at least a $6B per year increase.

MSFT used to be at around $36, but it has dropped YTD 18% because of (1) uncertainty with the Yahoo! bid and (2) it is part of the technology sector which gets hammered during a recession. My prediction is that once the Yahoo fiasco is over, the stock will immediately jump from $29 to around $32+, because this is where it was before the bid and there was no other catalyst pushing the stock price down. From there, the price target is about $40. Currently the stock is cheap. Its current P/E is 15.51, which is not only less than its industry's average (16.58), but the lowest it has been since 1996. If you take into account growth, its PEG is still only 1.21, that is about average for its industry and sector. Microsoft should be trading at a premium. Moreover, Microsoft has beat analyst earnings the past 7 quarters and EPS trends for the current quarter have been revised to increase the amount from the estimate 90 days ago. You don't really have to worry about the shorts pushing down this stock either, because only 1.50% of the shares are being shorted. During a recession, the tech sector doesn't perform well, but MSFT, RIMM, and AAPL are my bullish exceptions.

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Avatar JackCage100 (53.69) Submitted: 4/05/08 11:03 AM

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What a superb summary...thanks so much for doing this! jack

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Avatar PouyaZ (72.31) Submitted: 4/08/08 5:42 PM

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Thank you. You are welcome!

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Avatar Roberto73 (79.76) Submitted: 5/02/08 10:19 PM

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Good post, I agree almost with all you say except for one thing: I don't think we can be bullish on both AAPL and RIMM at the same time (though so far both have gained some ground). If, in about 1 year time, the iPhone becomes as successful as many people think, RIMM will very likely fall hard...

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Avatar valunvesthere (< 20) Submitted: 5/22/08 12:04 AM

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Dear PouyaZ,

I agree with you that MicroSoft Windows Vista OS was released with less fanfare, but Microsoft made alot of money on the many variants of MicroSoft Windows Vista OS from Computer Manufacturers.

Months before the early 2007 release of Microsoft Windows Vista OS all Computer Manufacturers from domestic and import purchased and pre-installed the OS in their newer models.

Finally, X-Box products, MicroSoft software, and computer hardware accessories are generating cash flow. MSFT is venturing into Apple territory with similar products and is heavily focussing on improving MSN search. My opinion is giving Jerry Yang what majority shareholders want and be done with the acquisition because Microsoft is not a very popular company ever since they release of Windows XP with no fan-fare. The last thing Steve Ballmer wants is regular Yahoo users switching allegiance to competing search engine incorporated or worst yet Yahoo employee exiles to MSN competitors. We want Steve Ballmer to be remember him for successfully making #4 MSN become #2 search engine in the near future and how he slayed GOOGLE for #1 spot.

Sincerely Valunvesthere.

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Avatar valunvesthere (< 20) Submitted: 5/22/08 12:37 AM

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Dear PouyaZ,

I agree with you that MicroSoft Windows Vista OS was released with less fanfare, but Microsoft made alot of money on the many variants of MicroSoft Windows Vista OS from Computer Manufacturers.

Months before the early 2007 release of Microsoft Windows Vista OS all Computer Manufacturers from domestic and import purchased and pre-installed the OS in their newer models.

Finally, X-Box products, MicroSoft software, and computer hardware accessories are generating cash flow. MSFT is venturing into Apple territory with similar products and is heavily focussing on improving MSN search. My opinion is giving Jerry Yang what majority shareholders want and be done with the acquisition because Microsoft is not a very popular company ever since they release of Windows XP with no fan-fare. The last thing Steve Ballmer wants is regular Yahoo users switching allegiance to competing search engine incorporated or worst yet Yahoo employee exiles to MSN competitors. We want to remember Steve Ballmer for successfully making #4 MSN become #2 search engine in the near future and how he slayed GOOGLE for #1 spot a little more further the future.

Sincerely Valunvesthere.

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Microsoft Corp (MSFT)

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