Can Microsoft Corporation (MSFT) Break Out?

Page 1 of 2

Microsoft Corporation (NASDAQ:MSFT) appears to be providing investors with quite the investment opportunity. This comes after having traded in a tight range between $23 and $33 over the last three years; it is currently trading in the mid-range at $27. We believe that Microsoft is finally ready to break out given its diverse product portfolio and growth opportunities.

Microsoft has a stronghold on the operating system market with its Windows platform, which continues to generate solid revenues and cash flows for the company. A key driver of its Windows operating system is the demand for PCs. Although the PC market remains weak it is gaining strength. Gartner estimates that PC shipments will grow 4.4% in 2012, an improvement over 1.9% growth in 2011. IDC has similar expectations with 2012 expected growth of 5%, following a 1.8% increase in 2011.

Warren Buffett

Given the growing importance of mobile platforms, Microsoft has been taking steps to build a position in the mobile computing segment. Its partnership with Nokia, which is currently the third largest player in the smartphone segment after Samsung and Apple, is the tech company’s main avenue for offering investors its Windows mobile OS. IDC expects the Windows Phone OS to be the second largest OS with a 19% global share of the smartphone market by 2016. Microsoft’s server business is also seeing solid growth from cloud computing – its server segment has posted double-digit revenue growth for 2010-2012. The other major segment for Microsoft is its gaming division, which makes it one of the three largest game providers.

The tech giant has a solid market positioning in the search engine sector. Microsoft has been taking market share from Yahoo specifically, and currently owns around 15% of the U.S. search market. We expect Microsoft’s search market infringement to continue with various initiatives, such as an agreement with HP to place Bing as the default search engine on most of its PCs. Microsoft is also continuing to seek growth via mergers and acquisitions. The tech giant made nine acquisitions in 2009 and added two more in fiscal year 2010. We see Microsoft as a solid value play; over the past five years, Microsoft shares have traded in the range of 8.6x to 19.5x earnings, but its forward P/E is as low at 8.5x.

Some of Microsoft’s biggest competitors include International Business Machines Corp. (NYSE:IBM), Oracle Corporation (NASDAQ:ORCL), Hewlett-Packard Company (NYSE:HPQ) and Google Inc (NASDAQ:GOOG). IBM pays a dividend yield that is low – 1.7% – but solid at only a 22% payout. The chipmaker trades somewhat in line Microsoft at 14x earnings and the diversified tech company has managed to gain 20% year to date on relatively solid earnings performance. Billionaire Warren Buffett is one of IBM’s biggest investors, having over 18% of his 13F portfolio invested in the tech company (check out Warren Buffett’s top picks).

Continue reading to see why Microsoft will outperform its competitors…

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!