Thursday, July 2, 2009

Will Microsoft Shares Ever Show Growth

For several years Microsoft shares have remained relatively stagnant. For approximately a decade the share price has displayed minimal variation. Refer to:

This campaign has indicated on multiple occassions that several years ago at an annual shareholder meeting Mr. Ballmer stated "the shares have been stagnant but we have plans and the shares will take care of itself". Despite Mr. Ballmers confidence in the "shares taking care of itself" there still is minimal variation.

A article with CBS Marketwatch makes reference to the potential of Microsoft shares reaching a level of $35 per share. Refer to:

In this article the author states that Microsoft could become a growth stock based on two primary factors. First, the author states "would be a home run for its new search technology, Bing". Microsoft has committed approximately $100 million towards an advertising campaign to promote Bing. Research shows that its share has increased by approximately 3%. That is relatively impressive growth, however, Google doesn't need to feel threatened. Google commands over 60% while Microsoft controls 13% of the search market. Bing will have to convince numerous users to steal another 50% share away from Google. It is optimistic yet not very likely.

In a CBS Marketwatch article the author Therese Poletti refers to Bing creating competition. Refer to:
The author concludes the article stating " So the key question now among investors, as Lindsay notes, is "is Bing sustainable, or will Microsoft mess it up?"

This campaign can very simply answer the above question presented by Ms. Poletti. At the beginning of the article she references to a parody video created concerning Bing. Refer to:

According to the initial CBS Marketwatch article the second issue confronting Microsoft is "More important to Microsoft's success is a very successful launch of Windows 7, the replacement for Vista".

It is evident that Microsoft failed with its release of Vista. The Mojave Experiment failed to rejuvinate interest with Microsoft and its operating system. There are numerous reports indicating that competitors such as Apple are slowly eroding Microsoft's dominance.

Microsoft still controls over 80% of the market. However, with increased competition and an weakened economy will Win 7 bring success?

Several consumers and companies will likely remain with a current operating system as oppossed to upgrading. Additionally, this segment of Microsoft will not bring much growth. It might show modest growth, sustain growth or loss share. Regardless, this segment is not a huge growth sector for Microsoft.

This ultimately leads to the final question or comment posted by the author of the initial CBS article. The author states "It is possible that both the launch of Bing and Windows 7 will under-perform investor expectations. Microsoft shares could go back to below $15, where they traded in March, if that happens".

Bing might have created a buzz with a $100 million advertising campaign, but, it is probably not sustainable. Google is part of the culture. Bing might be the best product from Microsoft in a long time, however, its probably not good enough to dethrone Google as King of Search.

Win 7 might generate renewed licenses and consumers might upgrade, however, it will not be perceived as growth. However, if Microsoft remains with Crispin Porter as their advertising agents then Win 7 will fail to create excitement with the consumer.

The sad yet realistic prediction is most likely Microsoft will remain stagnant. Despite Mr. Ballmers "plans" and his belief "the shares will take care of itself" they will probably remain flat. Microsoft requires a "New Strategy" before it ever becomes a Growth Stock.

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Anonymous said...

MS will revisit $15 this year, on its way to $10 and eventually zero in the years ahead.

Anonymous said...

"eventually zero"

Doubtful that it will drop to that level. Mid to low teens possible.