Despite a lot going on -- new product releases, primarily -- at Microsoft Corporation (NASDAQ:MSFT), many investors are growing tired of the fact that its stock appears to be “stuck in the mud.” This is despite the company’s Windows 8 upgrade and recent release of the Surface tablet.
(More on the Surface tablet here: Microsoft Corporation (MSFT): Is The Surface Tablet a Dud?)
Yes, the company remains profitable. And yes, its Windows operating system is still a major player. Even with all this going for them though, it is hard to deny the fact that cloud computing and mobile technology is putting the tech giant in a difficult spot.
Future growth is in question, especially since revenue numbers have recently stalled. Combine this with the company’s lack of a mobile presence (although they are focused on this), and investors are sure to feel a bit uneasy about what the future holds.
Here are a few things working against Microsoft at the present time:
1. Steven Sinofsky, the head of the Windows division, is on his way out the door. Why is this a big deal? Not only is he leaving at a crucial time with the release of Windows 8, but many believed him to be the next CEO.
2. According to many industry sources, Window 8 sales have not met early expectations. With this in mind, Microsoft is doing their best to "talk up" sales numbers thus far. Here is a look at Windows 8 sales compared to those of Windows 7.
3. The Surface tablet just isn’t getting the job done. Yes, there is a market for the tablet but the price point (starting at $499) has scared a lot of buyers away. At this price, it is hard to imagine that the Surface would be able to compete long term with the Apple iPad and Amazon Kindle, though there are rumors that the company is working on three more iterations of its tablet for 2013.
The challenges that lie ahead are scary. If Microsoft Corporation (NASDAQ:MSFT) is unable to evolve, the company could find itself being mentioned in the same sentence with other has-been high-fliers like Research in Motion and Hewlett-Packard, at least according to the bears' point of view.
On the positive side of things, investors can now get a mega-cap tech player at a very deep discount, as MSFT shares trade at a mere 8 times forward earnings, below both Apple (9.4X) and Google (14.9X).
With all this in mind, Microsoft shareholders have some serious thinking to do. The next 12 months will be critical to the software company’s long-term outlook. Let us know your thoughts on Microsoft in the comments section below.