4 ms·

I like Microsoft, but as a disclaimer before my analysis - I bought 400 shares of Microsoft stock a little bit ago at $25.79 per share. Here my thoughts: -Mic

I like Microsoft, but as a disclaimer before my analysis - I bought 400 shares of Microsoft stock a little bit ago at $25.79 per share. Here my thoughts: -Microsoft's price/earnings ratio is around 10, which I feel is pretty good for a company with a lot of stable revenue base and a chance at upside. -This article talks about Microsoft's poor performance in tablets, which is true and worrying. I'm not sure Microsoft will make that ground up. They do have an excellent research division, though, and I'm wondering if they can make a strong showing in the next generation of technology after this. I don't know what that'll be, but new input devices should be coming online. The Kinect is amazing, I was really blown away playing with one in Singapore. If Microsoft can build on that to do alternative input and the next generation, they could have a huge renaissance. -They have a very solid installed base. Government and business are very likely to keep running on Windows and Office. For consumers, even if tablets totally take over - and I'm not sure that'll happen - late adoptors will be buying those pre-installed Windows laptops and PCs just like always. -$50 billion in cash reserves means they've got a lot of time to figure something out going forwards. Lots of cash + some very stable covering their fixed costs + big research division = seemingly a pretty safe buy with some upside. I don't think it's a good stock to buy for short term appreciation - it might well go down over the next 2-3 years. But I'm comfortable holding it for 10 years. I think there's a decent shot it pays well in dividends and holds its value and a decent shot for lots of growth and appreciation. Of course, maybe the house does fall over. Do your own research, etc, etc, etc.

tytso 15y ago
I've thought about buying MSFT, for the dividend yield if nothing else. But considering how much MSFT is continuing to burn in their online division, and the fact that their two cash cows of Windows and Office are not necessarily stable -- I could see people switching to Office equivalents on iPads, etc., and ChromeOS potentially making a dent in the enterprise market (not having to pay for an extra help desk person for every 25 windows users is huge for a CIO), and with sales of PC down, I'm not so sure their revenue base or their installed base is guaranteed to be stable. The problem betting with cash resources is that this assumes that MSFT executives will be disciplined in spending it, and more importantly, not spending when an idea doesn't pan out. VC's are disciplined about knowing when to invest more, and when to cut a startup off. If you look at how much money MSFT poured down the Xbox hole, and how they are still don't have a positive ROI even taking Kinnect into account, I don't think their track record is very good on that score.
CamperBob 15y ago
$50 billion in cash reserves means they've got a lot of time to figure something out going forwards. Lots of cash + some very stable covering their fixed costs + big research division = seemingly a pretty safe buy with some upside. On the flip side, the only reason Microsoft has $50 billion in cash reserves is that their CEO failed in his valiant attempt to use it to buy Yahoo. I've got to believe there are more promising companies to invest in, even over the 10-year horizon you mention.
6ren 15y ago
Microsoft reputedly has of a poor record of commercializing their excellent research (they're not alone - e.g. Xerox PARC). It's tricky, which is one reason startups often overthrow the oldguard in the next disruption (as Microsoft itself did). But your example of Kinect is promising... even if they bought it rather than develop it themselves (idk which), they have commercialized this research.
mixmax 15y ago
It's not about how many people you've got in your R&D labs, it's about which people you have in your R&D labs.
- andreaja 15y ago
  Surely it's not about who does your R&D so much as what they produce? Most of the MS R&D papers I've read have been very good, with excellent ideas. Let's also not forget that GHC is maintained at MS R&D. The problem lies in converting research into product. One example is the data mountain[1]. The data mountain was way before its time (3d desktop in '98, which is still struggling to make inroads), it's a bad interface for a mouse-driven UI, but a good one for a touch-driven UI (probably not on a phone, but maybe on a tablet and definitely on a 20" or larger screen). But they haven't done anything with it. I don't think the right stuff from MS R&D is transported to the product development people, which is sad, but highlights one of the differences between Google and MS. At Google a lot of research papers are driven by actual solutions (cf. BigTable, GFS etc). At MS there's more 'pure' research going on and as a consequence the divide between the research people and the product people is larger. That's what it looks like to me anyway. I don't think there's any problem with the quality of the research being done at MS, quite the contrary. [1] http://research.microsoft.com/en-us/um/people/dcr/work/datamountain.htm http://research.microsoft.com/en-us/um/people/dcr/work/datam... (The video sadly seems to have fallen off the web.)

tytso 15y ago

I've thought about buying MSFT, for the dividend yield if nothing else. But considering how much MSFT is continuing to burn in their online division, and the fact that their two cash cows of Windows and Office are not necessarily stable -- I could see people switching to Office equivalents on iPads, etc., and ChromeOS potentially making a dent in the enterprise market (not having to pay for an extra help desk person for every 25 windows users is huge for a CIO), and with sales of PC down, I'm not so sure their revenue base or their installed base is guaranteed to be stable. The problem betting with cash resources is that this assumes that MSFT executives will be disciplined in spending it, and more importantly, not spending when an idea doesn't pan out. VC's are disciplined about knowing when to invest more, and when to cut a startup off. If you look at how much money MSFT poured down the Xbox hole, and how they are still don't have a positive ROI even taking Kinnect into account, I don't think their track record is very good on that score.

CamperBob 15y ago

$50 billion in cash reserves means they've got a lot of time to figure something out going forwards. Lots of cash + some very stable covering their fixed costs + big research division = seemingly a pretty safe buy with some upside. On the flip side, the only reason Microsoft has $50 billion in cash reserves is that their CEO failed in his valiant attempt to use it to buy Yahoo. I've got to believe there are more promising companies to invest in, even over the 10-year horizon you mention.

6ren 15y ago

Microsoft reputedly has of a poor record of commercializing their excellent research (they're not alone - e.g. Xerox PARC). It's tricky, which is one reason startups often overthrow the oldguard in the next disruption (as Microsoft itself did). But your example of Kinect is promising... even if they bought it rather than develop it themselves (idk which), they have commercialized this research.

mixmax 15y ago

It's not about how many people you've got in your R&D labs, it's about which people you have in your R&D labs.

andreaja 15y ago
Surely it's not about who does your R&D so much as what they produce? Most of the MS R&D papers I've read have been very good, with excellent ideas. Let's also not forget that GHC is maintained at MS R&D. The problem lies in converting research into product. One example is the data mountain[1]. The data mountain was way before its time (3d desktop in '98, which is still struggling to make inroads), it's a bad interface for a mouse-driven UI, but a good one for a touch-driven UI (probably not on a phone, but maybe on a tablet and definitely on a 20" or larger screen). But they haven't done anything with it. I don't think the right stuff from MS R&D is transported to the product development people, which is sad, but highlights one of the differences between Google and MS. At Google a lot of research papers are driven by actual solutions (cf. BigTable, GFS etc). At MS there's more 'pure' research going on and as a consequence the divide between the research people and the product people is larger. That's what it looks like to me anyway. I don't think there's any problem with the quality of the research being done at MS, quite the contrary. [1] http://research.microsoft.com/en-us/um/people/dcr/work/datamountain.htm http://research.microsoft.com/en-us/um/people/dcr/work/datam... (The video sadly seems to have fallen off the web.)