Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Microsoft Corporation (MSFT): Here’s Why You Might Want To Avoid It

Page 1 of 2

Investors have likely noticed the pronounced outperformance of Microsoft Corporation (NASDAQ:MSFT) shares over the past several weeks. Indeed, shares have rallied more than 20% just since mid-January. Long derided as being ‘dead money’ and a boring technology giant starved for innovation, Microsoft Corporation (NASDAQ:MSFT)’s share price performance in only a few months’ time is more indicative of a start-up in high growth.

Microsoft Corporation (NASDAQ:MSFT)

Beneath the excitement, however, is a disturbing lack of a suitable catalyst for such a rally. Should investors jump on the train? Or would investors be better served putting the uptrend under a microscope for further analysis?

Console mania in perspective

Presumably, a significant catalyst behind the rally in Microsoft Corporation (NASDAQ:MSFT) shares has to do with the likely revelation of a new Xbox video game console during a company event to be held May 21. It’s been eight years since the last new Xbox console release, so investors and video game fans alike are likely excited by the recent developments.

Fellow console maker Sony Corporation (ADR) (NYSE:SNE) is on a similar trend. After trading for less than $10 per share as recently as last December, the developer of the popular PlayStation console has rallied 70% in just a few months to its recent level of $17 per share.

Sony Corporation (ADR) (NYSE:SNE) released its PlayStation 3 device in the fall of 2006, and not wanting to be outdone by its closest competitor, will likely release a PlayStation 4 console around the same time of Microsoft Corporation (NASDAQ:MSFT)’s new release.

Curb your enthusiasm

Microsoft shares are in a clear uptrend, but for both video game enthusiasts and investors, the excitement surrounding new video game consoles needs to be put in the proper context.

Microsoft’s Entertainment and Devices Division is the business segment responsible for developing and producing the Xbox console. This division saw 35% revenue growth in 2006 and 28% revenue growth in 2007, thanks to the newly released Xbox 360.

However, it’s worth noting that Microsoft Corporation (NASDAQ:MSFT)’s Entertainment and Devices Division actually reported operating losses in both 2006 and 2007. That means that unfortunately, the Xbox itself was not a profitable venture for Microsoft when the last new console was released.

Furthermore, even in 2006 and 2007, the Entertainment and Devices Division accounted for less than 11% of Microsoft’s total revenue. And in fiscal 2012, the division made up just 13% of total revenue. To be blunt, the Xbox console is a drop in the bucket.

What really matters for Microsoft

A new video game console generates a lot of buzz from the media, for obvious reasons. However, for all intents and purposes, the Xbox just doesn’t matter for Microsoft.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

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 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!