MSFT - Microsoft

[ilike]

http://www.forbes.com/sites/andrewcave/2014/03/04/former-microsoft-ceo-steve-ballmer-my-biggest-regret/

 

Still on the BoD. Still pushing consumer devices. I guess he is also one of the few ppl who think Whatsapp could be worth 19 bill. In a way I feel good that he wasn't around to allow MSFT to compete for that "asset".

 

Well they did buy Skype at a huge valuation and it's a similar platform with similar challenges.

 

These messaging apps are a dime a dozen and should be valued accordingly.  There's almost no technology in them.  They have a network of users but that user base has proven to be ephemeral at best.  Here's a list:

 

AIM

MSN Messenger

ICQ

Facebook Messenger

BBM

Skype

WhatsApp

iMessage

Hangouts/gTalk

SnapChat

Kik

IM+

Yahoo Messenger

SMS

 

Probably the collective valuation for these networks is $50bn+, and outside of SMS there is no money being made that moves the needle.

 

I'd love to see a business in messaging.  Maybe it will be in direct marketing meets messaging.  However since there is no technology moat, it's really easy for some upstart to clone a service, offer it without direct marketing messages, and kill the user base.  Someone needs to come up with unbeatable messaging technology that will keep users around in spite of cost (be it advertising or explicit fees).  Without it, these messaging apps are doomed to repeat history and become valueless over time.

 

Why anybody buys a network that doesn't have a working business model is beyond me.  MySpace is another great example here.  Great network, no business, Murdoch lost half a billy.

 

You seem to ignore the ones that actually have a working business model.

 

Line

WeChat

Kakao

 

 

[VAL9000]

You seem to ignore the ones that actually have a working business model.

 

Line

WeChat

Kakao

 

I didn't ignore these on purpose, I simply had no knowledge of them.  The main point of my argument is that without valuable, differentiating technology, it's unlikely that any of these networks will last.  I'm curious to see if the virtual goodies revenue model will scale, though.

[Palantir]

Office for iPad is beautiful, love MS's design language with its bold colors.

[fareastwarriors]

Jeffrey Ubben's Hedge Fund Is The Big Microsoft Winner

 

http://www.forbes.com/sites/nathanvardi/2014/04/02/jeffrey-ubbens-hedge-fund-is-the-big-microsoft-winner/

[texual]

I didn't pay much attention to the price action on this stock for a long time. Just saw the chart. Wow.

 

I feel like Microsoft proved themselves to the market and I feel their product portfolio is going where I would like it to be. Great investment so far, but I began buying this up in 2009, and then took a break and added again the past two years every time it dipped.

 

Does anyone else think Microsoft will continue to grow marketshare in mobile?

 

Do you guys have an Xbox One?

 

The iPad now has Office.

 

Sweetness.

[Palantir]

^Yep, I should have bought more. I think the Office for iPad is a big bet that's going to pay off massively for Microsoft. It may not be apparent now, but it really strengthens their ecosystem, devalues other productivity apps (Pages, Google Apps), due to its integration with OneDrive, it hurts storage competitors like Dropbox, iCloud and Google Drive, and makes them a serious player in mobile. Not to mention it also raises the profile of Office 365 itself, which is a major growth engine in its own right.

 

I believe that Apple isn't their main threat as much as Google, and I think that they will be best served by not releasing these apps for Android.

[Liberty]

Microsoft has been making good moves lately. Good start for the new CEO.

 

If they get out of devices a bit more, they could be a good natural ally of Apple against Google; Apple's strength has never been services, so Microsoft should aim to fill that niche, which is only possible if they stop filtering all their decisions through: "will this help push windows?"

 

Office for iPad a good start. They apparently already have 12 million downloads.

 

They've lost the platform war in mobile, they should focus on building software on top of all the existing platforms rather than lock themselves out into just win mobile, which is just shooting themselves in the foot IMO.

[leftcoast]

Do you guys have an Xbox One?

 

I have one of these:

http://www.geek.com/wp-content/uploads/2014/03/imadethisxboxone-590x442.jpg

[Guest wellmont]

Microsoft has been making good moves lately. Good start for the new CEO.

 

If they get out of devices a bit more, they could be a good natural ally of Apple against Google; Apple's strength has never been services, so Microsoft should aim to fill that niche, which is only possible if they stop filtering all their decisions through: "will this help push windows?"

 

Office for iPad a good start. They apparently already have 12 million downloads.

 

They've lost the platform war in mobile, they should focus on building software on top of all the existing platforms rather than lock themselves out into just win mobile, which is just shooting themselves in the foot IMO.

 

they've already done this. all their software is going to run on windows ios and android. in fact nokia released a bunch of phones that are based on android but feature microsoft services. I would not say they have lost mobile. they are a strong #3. bbry has lost mobile. they just haven't made it official yet. besides the OS doesn't really matter any more. that's why msft is giving theirs away on phones and tablets, which of course is what apple and google do. having said that I sold the small amount of msft I had. my hunch is that things will get worse before they get better. but that's just a guess. they have a built in excuse (management transition) if they miss a quarter. And they might just use it to do some restructuring.

[writser]

Frankly, I think nothing interesting has changed at Microsoft (from a financial perspective). A couple of months ago I posted this:

 

Present situation; Windows is still running on (ballpark) 90% of all desktop computers. Microsoft software is being used by every company on this planet. Largest shareholder is one of the smartest businessmen of the century. Balance sheet is rock solid. Produces stellar amounts of free cash flow. Margins suggest a huge moat. Hated by the general public. Some ventures (mobile, bing, entertainment) might have some upside. Stockprice appears cheap by several metrics.

 

As far as I am concerned only the bold parts changed. They're still making a shitload with Office, Windows, and Enterprise. Bing is no Google yet - and Windows Mobile no Android. Nevertheless the stock has risen 40% in a year. It might still be cheap but I sold.

[Palantir]

Microsoft is moving to a cloud based subscription model for its cash cow Office, and cloud companies trade at ridiculous multiples....

 

Going forward, I expect there to be less free cash flow as they invest vastly in their server infrastructure to compete with AWS and Google, and incomes drop due to lower bills due to the cloud-based business model. So in a sense, the guys who invested in MS due to its cash cow nature will exit, because it will be less of a cash cow, and growth investors start entering...

[VersaillesinNY]

In Conversation with Steve Ballmer at Saïd Business School, University of Oxford -  March 4, 2014

 

 

Great companies in the way they work, start with great leaders.

Steve Ballmer

[Palantir]

Microsoft’s Most Clever Critic Is Now Building Its New Empire

http://www.wired.com/2014/05/mark-russinovich/

[Kiltacular]

Microsoft’s Most Clever Critic Is Now Building Its New Empire

http://www.wired.com/2014/05/mark-russinovich/

 

Good article.  I was back into MSFT too early and out too early -- just before the "Big Clipper" left.  The more I read of late, it seems like tech has settled into a number of large players -- Apple, Amazon, Facebook, Google, Oracle, IBM and MSFT.

 

I think this group is going to take a huge share of the whole pie and not from each other but from everyone else.  And, they'll buy anything that seriously threatens them.

 

Perhaps this is obvious...if not, flame away.

[Guest longinvestor]

Frankly, I think nothing interesting has changed at Microsoft (from a financial perspective). A couple of months ago I posted this:

 

Present situation; Windows is still running on (ballpark) 90% of all desktop computers. Microsoft software is being used by every company on this planet. Largest shareholder is one of the smartest businessmen of the century. Balance sheet is rock solid. Produces stellar amounts of free cash flow. Margins suggest a huge moat. Hated by the general public. Some ventures (mobile, bing, entertainment) might have some upside. Stockprice appears cheap by several metrics.

 

As far as I am concerned only the bold parts changed. They're still making a shitload with Office, Windows, and Enterprise. Bing is no Google yet - and Windows Mobile no Android. Nevertheless the stock has risen 40% in a year. It might still be cheap but I sold.

 

I believe MSFT future hinges on taking a significant share of future enterprise business with the move to non-premises computing (aka cloud). In my own experience, there has been a huge white space void in the small enterprise market which MSFT should capture easier than the others. Large enterprise domination by the Oracle/SAP's of the world is also threatened by the move to the cloud. 

[Guest wellmont]

I think msft is more open to putting xbox, nokia, mouse keyboards controllers, and surface in it's own company. Not sure what they do with bing. But the other side of the company would be focused on cloud and enterprise. At that point they could start making targeted acquisitions in that enterprise/cloud area.  They also might return some cash this year in the form of a dutch tender offer. I like the direction they are going in with new ceo new chairman and valuact on the bod. 

[txlaw]

Nadella's letter to the employees:

 

http://recode.net/2014/07/10/microsoft-ceo-nadella-on-what-needs-to-stay-and-change-at-microsoft/

[wachtwoord]

I think msft is more open to putting xbox, nokia, mouse keyboards controllers, and surface in it's own company. Not sure what they do with bing. But the other side of the company would be focused on cloud and enterprise. At that point they could start making targeted acquisitions in that enterprise/cloud area.  They also might return some cash this year in the form of a dutch tender offer. I like the direction they are going in with new ceo new chairman and valuact on the bod.

 

MSFT has sufficient liquidity, why would they make a Dutch tender offer and not just by from the open market? (as that's cheaper in general).

 

Also MSFT isn't very undervalued right now (if at all) so I would prefer dividends.

[Guest wellmont]

because you can buy a lot of stock in one day. I advocated aapl doing a dutch tender at much lower prices. they didn't. the result is they will end up with a higher cost on the shares that they ultimately buy back. In fact they may stop buying back stock under the pretense that it's no longer attractive, and that culturally they simply don't like to return capital.

 

I would much prefer a buyback because it's more tax efficient return of capital. But they might do a special dividend instead. As long as the buyback is done at prices below intrinsic value it's a good use of cash.

 

 

[wachtwoord]

because you can buy a lot of stock in one day. I advocated aapl doing a dutch tender at much lower prices. they didn't. the result is they will end up with a higher cost on the shares that they ultimately buy back. In fact they may stop buying back stock under the pretense that it's no longer attractive, and that culturally they simply don't like to return capital.

 

I would much prefer a buyback because it's more tax efficient return of capital. But they might do a special dividend instead. As long as the buyback is done at prices below intrinsic value it's a good use of cash.

 

The daily volume on MSFT is 30M shares, that's 0.36% of all outstanding shares. Seems sufficient to me. The only reason I see for Dutch auctions is for small low liquidity companies that wish to buy back shares.

 

Further, personally I'd much prefer a dividend as I can subtract American dividend taxes from Dutch taxes anyway ;)

[Guest wellmont]

that's the exact same argument I got on the aapl thread. the problem with that is the stock can get "away" from you as you execute your value creation plan. msft will be implementing a new plan to create value. Smart managements and bod get out in front of the value creation by buying back a lot of stock before the market understands and discounts the transformation. It's not true that dutch tenders are for small companies with illiquid stocks.

http://www.microsoft.com/en-us/news/press/2006/aug06/08-18tenderprelimpr.aspx

 

you may also wish to review the chapter in YCBASMG on General Dynamics, which was not an illiquid name.

http://books.google.com/books?id=Egk6rdZUS6MC&pg=PA192&lpg=PA192&dq=general+dynamics+dutch+tender&source=bl&ots=CRfh8OKfBn&sig=M1i1ywPBwIKIolYW4bYrQv57oaA&hl=en&sa=X&ei=ovK-U_PfCYX4oASWjYHQDQ&ved=0CCMQ6AEwAQ#v=onepage&q=general%20dynamics%20dutch%20tender&f=false

[Liberty]

that's the exact same argument I got on the aapl thread. the problem with that is the stock can get "away" from you as you execute your value creation plan. msft will be implementing a new plan to create value. Smart managements and bod get out in front of the value creation by buying back a lot of stock before the market understands and discounts the transformation. It's not true that dutch tenders are for small companies with illiquid stocks.

http://www.microsoft.com/en-us/news/press/2006/aug06/08-18tenderprelimpr.aspx

 

I agree. I also would have liked to see a tender by AAPL. But at least they used ASR opportunistically to, f.ex, grab $14 billion in two weeks when the stock dropped, so it's not like they're just buying in a straight line regardless of price.

 

http://www.reuters.com/article/2014/02/07/us-apple-repurchase-idUSBREA1606820140207

[wachtwoord]

Thanks for the information wellmont, perhaps I'm wrong. I certainly don't have data or sources to back up my argument. Thanks for sharing yours :)

[bobp]

This was mentioned on the aapl page. Companies with the most untaxed foreign profits:

 

http://www.bloomberg.com/news/2013-08-13/microsoft-ibm-top-list-of-u-s-tech-firms-with-biggest-overseas-profit-hauls.html

 

Microsoft tops the list with 76 billion. Does the possibility of some sort of tax holiday enter into anyone's decision to own microsoft? Or cisco? Any of these companies?

[A_Hamilton]

This was mentioned on the aapl page. Companies with the most untaxed foreign profits:

 

http://www.bloomberg.com/news/2013-08-13/microsoft-ibm-top-list-of-u-s-tech-firms-with-biggest-overseas-profit-hauls.html

 

Microsoft tops the list with 76 billion. Does the possibility of some sort of tax holiday enter into anyone's decision to own microsoft? Or cisco? Any of these companies?

 

No. In fact I tax effect MSFT's gross cash balance and then subtract out debt to arrive at EV. Also, I use a 35% tax rate for MSFT as the current rate is absurd. Also absurd is the amount of present value pissed away by sitting on the money abroad as opposed to paying the tax, repatriating it and buying the stock back when it was in the $25-$30 range the last two years (or now paying it out as a divi). Crazy that the company's board apparently has no opinion on the value of its stock given the tiny repo that has gone on the past few years.