Microsoft Corp (NASDAQ:MSFT)

CAPS Rating: 3 out of 5

The world’s leading software company, Microsoft is the force behind the Windows operating systems and the Office suite of software.

Recs

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Player Avatar icanpickm (99.22) Submitted: 5/26/2011 1:06:29 AM : Outperform Start Price: $22.50 MSFT Score: +36.68

David Einhorn finally said out loud what everyone knows. Balmer has to go. With Einhorn working on making this happen and putting his money where his mouth is, investors may start to get interested.

The days of running around the stage a company meetings screaming and trying to get everyone fired up are over. Employees can't get excited about their strategy of copying other great innovator's ideas, taking years to do it, doing it poorly, and spending 10x the money to do it. Investors can't get excited either.

Here is what investors would get excited about:

Spin off Xbox/kinnect into separate company with an IPO.
Give up on phones, you lost, pocket the savings
Give up on ipad imitations/windows for tablets, you lost. Pocket the savings.
Give up on search, they are just copying googles results anyway and they can't figure out how to make money selling ads (Copy adwords)
Stop the Skype deal before another 8 billion is vaporized.
Layoff tons of workers, the innovative companies will hire them.
Spend some of the money to continue patching holes in windows so the customer base erodes more slowly.
Keep releasing new office versions, but don't change anything besides the packaging. Office works fine, no one likes the changes anyway.
Do the same as above with windows but do it less often.
Continue with the cloud efforts but don't spend any money on it.
Cut R&D from 9 billion a year to about 1 billion. (About what apple spends)
Cut the advertising to the bone.
Sell empty buildings in Redmond to Amazon

After doing all of the above, take the massively increased cash flow of about $25 billion and return it to the shareholders in the form of a 8 to 12% dividend. This would send the stock to over 50 in short order.

Everyone knows this is what needs to be done, Gates knows it, and Einhorn certainly does. Maybe he has the juice to get it done.

Report this Post 10 Replies
Member Avatar baselineace (81.63) Submitted: 6/1/2011 10:14:33 PM
Recs: 0

Well put!

Member Avatar baselineace (81.63) Submitted: 6/1/2011 10:15:22 PM
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I meant to direct that @OmegaSD, just to clarify.

Member Avatar icanpickm (99.22) Submitted: 6/6/2011 12:12:44 AM
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"Idiot" that seems a little strong. Do you really think they will make a profit from phones. Even if the phone software is decent and they some how collect a license fee on 50 million phones a year, maybe they make a billion. Knowing Microsoft, they will spend 3 billion a year to make that 1 billion. They can't make it up in search because they don't make money from their search ads.

Maybe I did exaggerate a little to make a point, but the fact is, they have not created a hit since their cash cow windows and office. Those cows are still producing and will continue to do so for many years. If those profits we not thrown away, the could be returned to shareholders and make them a profit. Isn't that the whole point.

Member Avatar 4melody (24.79) Submitted: 6/9/2011 8:13:02 AM
Recs: 0

Still buying Microsoft shares. I do not see them going up in value as much as the possibility of a share split.

Microsoft Office is extremely user friendly and will survive Cloud Storage or not!

Member Avatar astephan2525 (< 20) Submitted: 6/16/2011 10:17:39 PM
Recs: 0

If you think Microsoft has so many problems, can I ask why you are thumbs-up the stock?

Member Avatar manriquesoto (79.55) Submitted: 7/21/2011 11:52:47 AM
Recs: 0

Most of your points are wrong but entertaining; can you imaging if MS would have listened to people telling them to give up on the XBOX just because Sony, Nintendo, and Sega were the leaders?

Member Avatar joaquingrech (98.76) Submitted: 7/24/2011 8:00:48 AM
Recs: 4

Well, it caugh my eye because I thought you were going to explain why Balmer should go on more detail. I'm not a big Balmer fan myself.

But the list you mentioned is just ridiculous. It seems written by an Apple fan and Microsoft hater with zero serious analysis. The only shocking thing is that you "green thumb" it :?

If you can give some in-depth analysis I may hit "rec".

From my point of view Microsoft is an excellent business. Not all business lines are working out (neither for apple or google) but the ones that do are awesome cash cows.
The main issue is that they don't growth. They've been stuck in there for years. And they can even begin shrinking if their OS and Office software begins to lose customer base.

So they were innovative and ahead of the curve on phones (windows mobile was way ahead of anything on its day, and at some things even better than the current iOS. Note: I do mobile apps on all platforms). They just executed it poorly letting Apple grab the cake. They can't let the mobile division go because it is where growth is and what could cut most of their user base if lost. Windows running on ARMH chips is essential on this.

Office is an awesome product. It runs on the cloud now (not a fan so far of any cloud system), it runs on macs and windows and it will run on mobile.

You can't compare R&D of microsoft vs apple either. Completely different things, Apple is mostly a marketing machine since all manufacturing and R&D is delegated to the third parties. Remember, they don't build their phones or macs, others do it. That's why Apple is able to get a 40% profit margin: delegate cost and overprice products.

Microsoft on the other hand does everything it sells. Google is a more fair comparison. R&D is hugely important for such companies.

As to droppping line of businesses... well, that's very easy to say without having any clue on what's going on inside. People was saying the same about Netscape vs IE, about Xbox vs PS, about Windows vs Mac (old days), etc... and the same way than MacOS recovered from death and Microsoft beat on the long run most other businesses, you can't just scratch out a whole business line just because it's not working the way it should right now.

The only thing I agree on there is that Ballmer should go. It's a tech company and new people should be brought in with fresh ideas, giving microsoft a bit of a shake-up would be nice and that should be represented clearly by beginning with top management. I said a "bit". You don't want all of the sudden all top management to be 25 yo with no experience on running a big corporation.

Member Avatar ikkyu2 (99.38) Submitted: 8/23/2011 3:46:40 AM
Recs: 0

Love the original pitch - wish I could give it more than 1 rec.

As for joaquin above - Value Destruction Ahoy!

Member Avatar icanpickm (99.22) Submitted: 8/31/2011 1:47:17 AM
Recs: 0

Thanks ikkyu2. I need a hug.

Member Avatar Eerkes (90.30) Submitted: 9/9/2011 10:23:54 AM
Recs: 0

i want to like this company, but i just keep buying mcd instead

you dont have to think to buy mcd, you just divide the # of dollars you have by the share price and thats how many shares you get

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