Thursday, July 7, 2011

"Could the sleeping giant, Microsoft (MSFT), finally awaken from it's 10 year slumber?"

Dow Jones Industrial Average  12,721.88  (Way UP!)  Thursday 12:33PM EST, 07-07-2011

I know it has been a flat line stock price for 10 years. I know a hundred guys before me have written this same article, thinking that something eventually had to happen and waited and waited and oh, waited some more. You have a 2.43% dividend yield and a PE of 9 to hold you over in case nothing happens with little downside risk.

 Microsoft, Inc. (Symbol MSFT, $26.74) finally seems to be "in motion" on a two pronged front creating a catalyst for growth. Getting their operating system into the Smartphones of Nokia (Symbol NOK, $6.45) , which if you take off your US rose-colored glasses, has tremendous international distribution is big. Nokia is a perfect match for the Microsoft's simplified Smartphone interface . They have always embraced simplified operations for electronic devices that they have built.  Nokia also has other interesting connections like owning NAVTEQ the maker of many GPS mapping software. This move should help both these companies.

The second catalyst is that Microsoft is in the process of acquiring SKYPE for 8.5 Billion. (One thing Microsoft has is plenty of cash!).
Microsoft plans to leverage Skype by forming a relationship with Facebook and marrying these two social networking interfaces together to surge forward with a new type of voice and data social networking experience.

Add these factors to a company is going to earn $2.58 per share for 2011 and $2.77 per share for 2012 and you are looking at a very good fundamental and value proposition with the stock at this level. I could see the stock going to the $35-$37 dollar range without allot of trouble.

When you look at the other companies in Microsoft's space, like Oracle, Redhat and Salesforce,  they all have had 40 plus % Total Returns for One year. Microsoft is only at 4.4% total return for this year, even though they have the highest ROE Return on Equity, (44.70%),  much better than all those other companies mentioned . If Microsoft can raise the bar a little on that 5 year growth rate of 8.31% a little higher, they produce plenty of profit already, and could finally get this sleeping giant into motion.

This market has made a tremendous move here in the last 10 days of 700 points, so you should probably buy this stock in partial segments to build a position.

Stay cool on this hot day. It is finally time for Microsoft to start moving up, so get on board the train.


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