MSFT - Microsoft

[Palantir]

As an aside, to hedge by bets I'm tempted to buy Nokia, just in case MS buys it for 25B.

[Guest wellmont]

As an aside, to hedge by bets I'm tempted to buy Nokia, just in case MS buys it for 25B.

 

that's smart. hedge yourself against poor capital allocation at msft. I like the thinking. :)

[rpadebet]

As an aside, to hedge by bets I'm tempted to buy Nokia, just in case MS buys it for 25B.

 

ValueAct is trying for a seat on the Board. I guess, this sort of acquisition is their main concern too.

 

If MSFT "had to buy" some device manufacturer, I would rather they buy BBRY than Nokia. At least they have some enterprise level synergies.

 

Also, I am praying they don't buy Facebook/Zynga to get into the social game now or Netflix at current prices to get into Media Streaming business. I wouldn't discount these "ideas" until Ballmer is there though.

[texual]

Blackberry over Nokia? That makes no sense. They've partnered for over two years with Nokia and have a deep connection with the engineers and designers over those Lumia phones. I would be upset if they got involved in Blackberry (personally I think Blackberry has no chance of being popular with consumers), but even their enterprise stuff isn't valuable enough for Microsoft to buy them. I think Microsoft has enough software work being done with Windows Phone 8, they just need the hardware chops.

 

When it comes to design and quality I think Nokia is world class.

 

They won't buy Nokia anyways, they've basically got the company to do their bidding without paying much for it either.

[kevin4u2]

As an aside, to hedge by bets I'm tempted to buy Nokia, just in case MS buys it for 25B.

 

Perhaps i'm the only one who fails to see the logic.

 

According to this thinking one could buy almost any tech company as MSFT "might" buy them too. Would I also be hedging my bets, just in case MSFT uses its cash hoard to buy someone else?

 

Secondly the financial success of both companies are tied at the hip? So unless the low probability event occurs as you describe, would this be a hedge or a strong correlation?

[bargainman]

As an aside, to hedge by bets I'm tempted to buy Nokia, just in case MS buys it for 25B.

 

ValueAct is trying for a seat on the Board. I guess, this sort of acquisition is their main concern too.

 

If MSFT "had to buy" some device manufacturer, I would rather they buy BBRY than Nokia. At least they have some enterprise level synergies.

 

Also, I am praying they don't buy Facebook/Zynga to get into the social game now or Netflix at current prices to get into Media Streaming business. I wouldn't discount these "ideas" until Ballmer is there though.

 

What is your source on valueact?

[Guest valueInv]

Blackberry over Nokia? That makes no sense. They've partnered for over two years with Nokia and have a deep connection with the engineers and designers over those Lumia phones. I would be upset if they got involved in Blackberry (personally I think Blackberry has no chance of being popular with consumers), but even their enterprise stuff isn't valuable enough for Microsoft to buy them. I think Microsoft has enough software work being done with Windows Phone 8, they just need the hardware chops.

 

When it comes to design and quality I think Nokia is world class.

 

They won't buy Nokia anyways, they've basically got the company to do their bidding without paying much for it either.

 

Not quite:

 

http://www.pcworld.com/article/2042470/report-microsoft-and-nokia-talked-acquisition.html

[writser]

As an aside, to hedge by bets I'm tempted to buy Nokia, just in case MS buys it for 25B.

 

Perhaps i'm the only one who fails to see the logic.

 

According to this thinking one could buy almost any tech company as MSFT "might" buy them too. Would I also be hedging my bets, just in case MSFT uses its cash hoard to buy someone else?

 

Secondly the financial success of both companies are tied at the hip? So unless the low probability event occurs as you describe, would this be a hedge or a strong correlation?

 

Agreed. Also, Microsoft is way bigger than Nokia so either your "hedge position" will be very small in comparison to your Microsoft position or you will have a lot Nokia exposure.

[rpadebet]

As an aside, to hedge by bets I'm tempted to buy Nokia, just in case MS buys it for 25B.

 

ValueAct is trying for a seat on the Board. I guess, this sort of acquisition is their main concern too.

 

If MSFT "had to buy" some device manufacturer, I would rather they buy BBRY than Nokia. At least they have some enterprise level synergies.

 

Also, I am praying they don't buy Facebook/Zynga to get into the social game now or Netflix at current prices to get into Media Streaming business. I wouldn't discount these "ideas" until Ballmer is there though.

 

What is your source on valueact?

 

http://www.reuters.com/article/2013/07/19/net-us-microsoft-valueact-idUSBRE96I14920130719

 

http://www.bloomberg.com/news/2013-07-19/microsoft-valueact-said-to-discuss-director-appointment.html

 

 

[Palantir]

As an aside, to hedge by bets I'm tempted to buy Nokia, just in case MS buys it for 25B.

 

Perhaps i'm the only one who fails to see the logic.

 

According to this thinking one could buy almost any tech company as MSFT "might" buy them too. Would I also be hedging my bets, just in case MSFT uses its cash hoard to buy someone else?

 

Secondly the financial success of both companies are tied at the hip? So unless the low probability event occurs as you describe, would this be a hedge or a strong correlation?

 

The comment was partially tongue in cheek. I suspect MSFT will try to vertically integrate their phone lines as OEMs are not interested. Which better way to do so than Nokia?

[Guest valueInv]

As an aside, to hedge by bets I'm tempted to buy Nokia, just in case MS buys it for 25B.

 

Perhaps i'm the only one who fails to see the logic.

 

According to this thinking one could buy almost any tech company as MSFT "might" buy them too. Would I also be hedging my bets, just in case MSFT uses its cash hoard to buy someone else?

 

Secondly the financial success of both companies are tied at the hip? So unless the low probability event occurs as you describe, would this be a hedge or a strong correlation?

 

The comment was partially tongue in cheek. I suspect MSFT will try to vertically integrate their phone lines as OEMs are not interested. Which better way to do so than Nokia?

 

Nokia has a lot more upside that MSFT. It is highly probable that Windows 8 mobile will go from 5% marketshare to 7-10% marketshare. With Nokia being the leading hardware vendor, its a big jump for NOK, but it won't move the needle for MSFT.

[Guest wellmont]

As an aside, to hedge by bets I'm tempted to buy Nokia, just in case MS buys it for 25B.

 

Perhaps i'm the only one who fails to see the logic.

 

According to this thinking one could buy almost any tech company as MSFT "might" buy them too. Would I also be hedging my bets, just in case MSFT uses its cash hoard to buy someone else?

 

Secondly the financial success of both companies are tied at the hip? So unless the low probability event occurs as you describe, would this be a hedge or a strong correlation?

 

msft and nok has already been talking about an acquisition. nok ceo is ex msft. and if you read the tea leaves you know that msft wants to be more like apple and goog. that is make and sell devices. msft also have a history of making acquisitions that infuriate long term shareholders. so nok fills the bill in many ways.

[sethatk]

Think of the barriers of entry Microsoft, Google, and Apple have just by way of patents. Also, I do not believe the government would let one of these completely crush the others (probally the main reason MSFT bailed Apple out in the 90's). U.S. foreign policy has been to maintain the balance of powers for years now and as government and tech become more intertwined, one would think they may do the same here. Can anyone see a reason, or a change in the enviorment that would eliminate any of them 10 years from now?

[VAL9000]

Think of the barriers of entry Microsoft, Google, and Apple have just by way of patents. Also, I do not believe the government would let one of these completely crush the others (probally the main reason MSFT bailed Apple out in the 90's). U.S. foreign policy has been to maintain the balance of powers for years now and as government and tech become more intertwined, one would think they may do the same here. Can anyone see a reason, or a change in the enviorment that would eliminate any of them 10 years from now?

 

Elimination is unlikely but CAGR < 0% is a real possibility.

 

[Guest wellmont]

Think of the barriers of entry Microsoft, Google, and Apple have just by way of patents. Also, I do not believe the government would let one of these completely crush the others (probally the main reason MSFT bailed Apple out in the 90's). U.S. foreign policy has been to maintain the balance of powers for years now and as government and tech become more intertwined, one would think they may do the same here. Can anyone see a reason, or a change in the enviorment that would eliminate any of them 10 years from now?

 

msft relies on people using windows. how have all their patents protected that business, which really is in an inexorable, slow decline? the primary reason buffett does not invest in companies like these is because you can't predict out 5 years, let alone 10. It's not what we see now. It's what we don't see.

[kevin4u2]

Think of the barriers of entry Microsoft, Google, and Apple have just by way of patents. Also, I do not believe the government would let one of these completely crush the others (probally the main reason MSFT bailed Apple out in the 90's). U.S. foreign policy has been to maintain the balance of powers for years now and as government and tech become more intertwined, one would think they may do the same here. Can anyone see a reason, or a change in the enviorment that would eliminate any of them 10 years from now?

 

msft relies on people using windows. how have all their patents protected that business, which really is in an inexorable, slow decline? the primary reason buffett does not invest in companies like these is because you can't predict out 5 years, let alone 10. It's not what we see now. It's what we don't see.

 

However, Buffett has said that he would invest in MSFT but chooses not to because of the perceived confilict of interests with his buddy Bill Gates.  Will MSFT be around in 10 years?  I would be willing to bet a huge sum of money on that outcome. 

[Guest wellmont]

 

However, Buffett has said that he would invest in MSFT but chooses not to because of the perceived confilict of interests with his buddy Bill Gates.  Will MSFT be around in 10 years?  I would be willing to bet a huge sum of money on that outcome.

 

I would bet a lot of money on that too. But that's not really what we were discussing. I don't think I or anyone here suggested they won't be around in 10 years. What I said was that it's hard to predict where they will be in 5 years let alone 10. As investors we don't win when a company is simply not bust in 10 years. we only win if value is created. We don't know if things will better, the same, or worse. A lot depends on where technology goes, and how msft reacts and adapts to technology, and how msft ceo invests it's profits.

 

And I never heard or read that Buffett said he would buy msft stock. I would appreciate the source of that so I can have it for my own reference. thanks.

[SwedishValue]

I personally believe that quite a few of the use software/tech companies such as Microsoft/Oracle/IBM/Google are well positioned for further growth looking out ten years from now. It is true that we do not know the technological shifts that will occur up to that point, but when seeing how important the systems of these companies have been for the business world as we know it in the west, I believe that they will find good growth opportunities down the road as the world gets richer. The income composition of Microsoft/Oracle is much more similar looking back 10 years ago compared with a business such as Apple.

 

The scalability of the business model is also very nice for Microsoft.

 

I wish they bought back more shares instead of spending money (and trying to spend more) on questionable acquisitions.

 

Just my .02, I will spend some time trying to understand Microsoft better.

[kevin4u2]

 

However, Buffett has said that he would invest in MSFT but chooses not to because of the perceived confilict of interests with his buddy Bill Gates.  Will MSFT be around in 10 years?  I would be willing to bet a huge sum of money on that outcome.

 

I would bet a lot of money on that too. But that's not really what we were discussing. I don't think I or anyone here suggested they won't be around in 10 years. What I said was that it's hard to predict where they will be in 5 years let alone 10. As investors we don't win when a company is simply not bust in 10 years. we only win if value is created. We don't know if things will better, the same, or worse. A lot depends on where technology goes, and how msft reacts and adapts to technology, and how msft ceo invests it's profits.

 

And I never heard or read that Buffett said he would buy msft stock. I would appreciate the source of that so I can have it for my own reference. thanks.

 

Understood and agree.  Here is the interview of Buffett on MSFT. 

 

http://www.reuters.com/video/2011/05/01/buffett-says-us-not-a-credit-risk?videoId=205771014&videoChannel=5

 

I guess it is kinda reading between the lines, but the interviewer asks about a minute into the video about MSFT being a value play and he replies, "Yes I agree with you" but then goes into a explanation why he cant buy it and then says, "It does look pretty cheap." 

[Guest wellmont]

 

I guess it is kinda reading between the lines, but the interviewer asks about a minute into the video about MSFT being a value play and he replies, "Yes I agree with you" but then goes into a explanation why he cant buy it and then says, "It does look pretty cheap."

 

yep I saw that. it's important to really understand what is actually being said and not said. He never said he would buy it. It took him a loooong time to get comfortable with ibm, which is a way more predictable and durable model imo. I don't think he would be buying msft at these levels. just my opinion. He probably thinks lots of stocks that he would never ever buy "look cheap". But, in this case, I don't think he would like some of these capital allocation decisions like aquantive, skype, surface, and the failed bid for yhoo. having said that Buffett passes on a lot of stocks that do very very well over the long term.

[rpadebet]

 

I guess it is kinda reading between the lines, but the interviewer asks about a minute into the video about MSFT being a value play and he replies, "Yes I agree with you" but then goes into a explanation why he cant buy it and then says, "It does look pretty cheap."

 

yep I saw that. it's important to really understand what is actually being said and not said. He never said he would buy it. It took him a loooong time to get comfortable with ibm, which is a way more predictable and durable model imo. I don't think he would be buying msft at these levels. just my opinion. He probably thinks lots of stocks that he would never ever buy "look cheap". But, in this case, I don't think he would like some of these capital allocation decisions like aquantive, skype, surface, and the failed bid for yhoo. having said that Buffett passes on a lot of stocks that do very very well over the long term.

 

I agree. Buffett has passed on this investment. I don't think the reason is because of his relationship with Bill Gates, that was just a way to get out of the question. He said he doesn't buy Technology firms, but bought IBM, so I don't think he is too rigid about his rules. His only rule seems to be whether the business makes sense at the price it is being offered.

 

The reason I think he passed on this one though is because of the capital allocation at MSFT. I am not saying an acquisition strategy is inferior to buybacks or dividends, but it depends on how the acquisition strategy is being executed. In MSFT's case, it is really poor. They probably have to do acquisitions in the consumer space though to maintain their market share and margins or at least keep them from eroding faster. I look at it more as maintenance Capex than growth capex. The return on these "maintenance Capex" investments has been nothing to boast about. This is why I think Buffett passed on this.

[kevin4u2]

 

I guess it is kinda reading between the lines, but the interviewer asks about a minute into the video about MSFT being a value play and he replies, "Yes I agree with you" but then goes into a explanation why he cant buy it and then says, "It does look pretty cheap."

 

yep I saw that. it's important to really understand what is actually being said and not said. He never said he would buy it. It took him a loooong time to get comfortable with ibm, which is a way more predictable and durable model imo. I don't think he would be buying msft at these levels. just my opinion. He probably thinks lots of stocks that he would never ever buy "look cheap". But, in this case, I don't think he would like some of these capital allocation decisions like aquantive, skype, surface, and the failed bid for yhoo. having said that Buffett passes on a lot of stocks that do very very well over the long term.

 

I totally agree with you about understanding what is said and not said.  My point is different.  What does Buffett always say when asked about tech?  Whenever asked this question the response is always the canned response of not understanding tech and that he can't predict it 5-10 years out.  His answer here was not for any of those reasons.  His reason for not considering a MSFT investment was his ties to Gates.  Perhaps I am reading too much into this but this was an exception to his canned response. 

 

Then shortly thereafter he invests in IBM.  You are correct, I may be reading into things. 

 

 

[Guest wellmont]

 

I totally agree with you about understanding what is said and not said.  My point is different.  What does Buffett always say when asked about tech?  Whenever asked this question the response is always the canned response of not understanding tech and that he can't predict it 5-10 years out.  His answer here was not for any of those reasons.  His reason for not considering a MSFT investment was his ties to Gates.  Perhaps I am reading too much into this but this was an exception to his canned response. 

 

Then shortly thereafter he invests in IBM.  You are correct, I may be reading into things.

 

what buffett needs in situations like this is a credible response to an annoying question. it doesn't always have to be the same response. in this case he is using an alternative response that's entirely credible. So he doesn't have to give his pat answer. This answer gives him an "easy out". He just dismisses the topic altogether with this response. So he is leaving no doubt in anyone's mind that he, or anyone at brk, will buy the stock. ever.

 

Be that as it may, what does it matter? why does it matter that he might buy it if he could? we can't just look to him to bless every investment we make. if we want to be successful at this, we are going to have to stand on our own ideas, models, and valuation constructs. in this case you're contorting yourself into a notion that he likes something (that would confirm your own conclusion). when in fact we don't know for sure. the point is it does not matter.

[kevin4u2]

 

I totally agree with you about understanding what is said and not said.  My point is different.  What does Buffett always say when asked about tech?  Whenever asked this question the response is always the canned response of not understanding tech and that he can't predict it 5-10 years out.  His answer here was not for any of those reasons.  His reason for not considering a MSFT investment was his ties to Gates.  Perhaps I am reading too much into this but this was an exception to his canned response. 

 

Then shortly thereafter he invests in IBM.  You are correct, I may be reading into things.

 

what buffett needs in situations like this is a credible response to an annoying question. it doesn't always have to be the same response. in this case he is using an alternative response that's entirely credible. So he doesn't have to give his pat answer. This answer gives him an "easy out". He just dismisses the topic altogether with this response. So he is leaving no doubt in anyone's mind that he, or anyone at brk, will buy the stock. ever.

 

Be that as it may, what does it matter? why does it matter that he might buy it if he could? we can't just look to him to bless every investment we make. if we want to be successful at this, we are going to have to stand on our own ideas, models, and valuation constructs. in this case you're contorting yourself into a notion that he likes something (that would confirm your own conclusion). when in fact we don't know for sure. the point is it does not matter.

 

Let me get this straight.  You're the one who brings up Buffett in your post that got this whole discussion started... then in your last post dismiss the entire discussion by asking what does it matter and lecture me about being independent. 

 

You may have read about cognitive biases but I have to ask... have you ever found one in your own thinking? 

[texual]

+1 agreed. Microsoft would be a great investment by Warren Buffett had he not such a close connection with its founder and chairman, Bill Gates. He said this many times in the past that Bill is his friend and that him sitting on Berkshire's board makes things difficult when someone could question what he knew about Microsoft through that connection.

 

I saw IBM as a 2nd best investment for Berkshire Hathaway, from the day the news came out. I bought more MSFT after that announcement and so far have done really well. I think I will do better than Warren Buffett on my MSFT investment vs his IBM one.