Tuesday, July 23, 2013

Why Microsoft will win

Before the stock market opened today, Microsoft was trading at $31 and change per share. That's down from around $35 prior to last Thursday -- when the software giant confirmed that Windows 8 and Surface sales were not gangbusters in its fiscal fourth quarter, which ended June 30.
Even so, Ron Chan, an analyst, with the The Appleseed Fund, a socially responsible, mid-cap value mutual fund, remains optimistic about the position Appleseed took in Microsoft earlier this year. Here's what he says:
Q: What would you say is the go-forward outlook for Microsoft?
A: From a numbers point of view, we believe Microsoft will continue to generate strong revenue growth and earnings growth. Windows may feel stagnant as Microsoft adjusts to the growing pains of Win8 , but Office and Servers should drive earnings, as will the Xbox.
From a strategic point of view, we believe Win8 makes a lot of sense. Win8 attempts to unify all hardware platforms – the PC, tablet, mobile, Xbox, etc. In this way, Microsoft is behaving somewhat like an Apple in that it wants to keep you into the Windows world with a tight integration of operating system and applications.
Q: Easier said than done.
A: The trick, of course, is to get people to use Win8. This seems much easier to do on the enterprise side, where folks are conservative, than on the consumer side, where tastes are a little more fickle. That said, Windows remains very sticky, in my view.
Q: How much could the release of Windows 8.1 later this year, combined with recentexecutive suite overhaul, undergird the push to devices and services?
A: The reorganization is trying to address the problem that Microsoft has had – it has all these great products, but none of them were coming together in a coherent fashion. By collapsing the product silos, or business unit silos, (CEO) Steve Ballmer hopes to create more integrated products.
Q: What's the optimistic reason to keep faith with the course Ballmer has set?
A: Microsoft has some great assets to work with. Windows, Office, Server, Xbox , Outlook, Skype, Bing, etc. This could translate into devices and services that provide a packaged solution to your computing needs. That's the way the world is going and it'll be very interesting to see. For example, how about doing a Bing Search while in Microsoft Word? The possibilities are endless.
Q: What's the pessimistic scenario?
A: We're optimists.

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