Microsoft Corp (NASDAQ:MSFT)

Lituus (89.85) Submitted: 8/14/2012 5:54:52 PM : Start Price: $29.61 MSFT Score: -14.47

When looking at Mr Softy today, It's not really about the standard stock metrics like P/E, price to cash flow, dividend%, >$6B cash on hand, etc. Those all look very reasonable. The big question is strategic and how MSFT will fare going forward.

The PC market is at an interesting transition point where tablets and smartphones are taking the majority of the growth and desktops & notebooks are looking downright old-school. MSFT has not fared well in this transition to mobility but they could definitely get in the game later this year.

It's a bit of a gamble but I'm betting that the Windows 8 launch will be a success and the stock will get a boost from it.

MSFT is also a very big, diverse company with more going on than O/S releases. My thoughts:
1) Surface tablet - will not sell well and MSFT will end up shutting it down within 6 months of launch due to pressure from hardware OEMs.
2) SQL and enterprise software - these offerings have high market share and should continue to grow. Due to big company IT department risk aversion these market do not change rapidly.
3) XBox - expect more of the same... not much profit and a perennial dog fight for share but at least this product makes a connection with a younger demographic and has a bit of the coolness factor.
4) MS Office - a solid money-maker and a promising future. Of course there is the challenge by online offerings but latency (app reaction time) is a huge issue so I don't see a significant shift at this point.
5) Mobile phones & partnership with Nokia - epic fail! I don't see MSFT ever gaining traction in mobile phones.
6) Online services & Bing - MSFT starting to have some solid offerings here and this may eventually bring in some significant revenues from SMBs but it could take years to grow.
7) Win8 - the early feedback is that folks love it with smartphones and tablets but hate it with notebooks. I think that the hate it on notebooks thing is just an initial reaction to something new and expect folks to get used to it over time. There is also the option to change a setting so that you see the traditional user interface. Pricing will be the key to Win8 success and I expect MSFT to 'bet the farm' on the launch this Fall with heavy, heavy promotion and unheard-of low prices to get the market to shift quickly.

So there it is. MSFT, game on!

[disclosure: this is a CAPS pick only for me. Not putting real money on this pick]