Microsoft's Stock Deserves a Fresh Look
WSJ
Microsoft confirmed Thursday its Windows cash machine is under threat. So what else is new?
Uncertainty about the PC market’s growth prospects, and what that means for Windows in particular, arguably has been baked into Microsoft’s stock price for years. From 2001 to 2010, Microsoft’s net income rose 155% on 147% higher revenue. Yet as of Thursday’s close of $26.71, Microsoft shares over the past decade had generated a total return, including dividends, of negative 0.2%, according to FactSet Research Systems.
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There also is the threat from Google: Laptops running the search firm’s Chrome operating system are expected to hit the market midyear. Assuming Microsoft can limit the speed of such incursions, it would have a better chance of changing investor sentiment if the company was managed in a more disciplined way.
Spending 14%-15% of revenue on research and development, which Microsoft has done for years, looks extravagant given Microsoft’s new product history. Apple, for example, spends less than 3%. Not only has it been beaten by rivals on many of the digital world’s new developments in recent years, some of its new products, like Windows Vista or the Zune music player, have been duds.
