Microsoft shares suffer worst hit since 2000 (Stock down 11% today)

Dow Jones MarketWatch (excerpt) ^ | April 28, 2006 | Michael Page

[bigdcaldavis]

Could this MS stock price plunge have anything to do with Gates and Hu engaging in mutual ass-kissing?

[stylin19a]

12% of 20 something bucks in 2006 is a lot less than
12% of 120 something bucks in 2000

[JasonC]

They have been dipping toes into everybody else's businesses instead of minding their own, and getting their clocks cleaned in every one of them. They think their core competence is everything in the universe, but haven't had an idea of their own in at least five years. They say me too and execute badly, entering extremely competitive markets against the smartest people on the planet, all at once. The stock looks like the EKG of a dead person for a reason.

They should be wowing us with a single big new hit of their own, that makes all our lives better in some dramatic and previously unexpected way. Instead they are fighting Sony over playstations and Google over search and Apple over music download protocols. A recipe for carrying your head around with something other than your neck, if ever there was one. The mystery is why on earth they think any of those fights are sensible or remotely their business.

[JasonC]

Cash and short term investments - $37.8 billion. Earning 4%. Anybody that thinks people who can invest new capital at 30% rates of return, sits on over $35 billion in cash earning 4%, is smoking something. The core near monopoly operating system business earns obscene monopoly returns. But they can't grow it to save their lives. They can't squeeze a single new dollar into that part of the business.

No, it spits dollars out at them. Which they then have to do something sensible with. When they can't think of anything, it sits in the bank. When they do think of things, half the time the thing is stupid. The old business is worth plenty but the reinvestment isn't adding anything like comparable returns. Hence the flat line, and the cash mountain (which is down, incidentally, on things like share buybacks).

[Golden Eagle]

Microsoft is incredibly large not only in market share of their products but in widescale ownership of their stock. It's hard for something to rise when almost everyone already has it.

Doesn't sound like they're hurting too bad though, other excerpts from the article...

Microsoft said net income for the fiscal third quarter ended March 31 rose to $2.98 billion, or 29 cents a share, from $2.56 billion, or 23 cents, a year earlier, boosted by stronger demand for its software used to run corporate servers and personal computers.

Sales rose 13% to $10.9 billion as Microsoft saw a sharp rise in demand for other software targeted at corporate users. Its home-entertainment unit was helped by higher sales of its Xbox video game player.

Sales at Microsoft's server business came in solid, rising 16% as the company continued to reap the benefits of several new product launches late last year.

The company's flagship Windows segment posted a 7.5% rise in revenue on higher sales of PCs, while sales at its business responsible for its Office programs rose 5%.

The home-entertainment business posted an 85% surge in sales and the mobile business saw revenue jump 46%, while sales at its business-solutions segment climbed 21%.

[Golden Eagle]

When they can't think of anything, it sits in the bank.

LOL at Microsoft distractors claiming $38 bil in the bank is a liability. It's right about three times their current yearly profit so actually close to an ideal situation with regard to protection. There simply aren't too many technology markets they're not already heavily into, and they can't just go around buying up too many other companies because of the Janet Reno conviction against them for being a monopoly.

I wouldn't worry too much about Microsoft's $38 billion sitting in the bank if I were you. Unless you want it to go away, if not the company altogether.

[AD from SpringBay]

Only in the 'new economy' is 38 Billion in the bank a bad thing. Maybe Gates could do us all a favor and just buy Iran. Would that make the investors happy?

[Golden Eagle]

Only in the 'new economy' is 38 Billion in the bank a bad thing.

Well said. Janet Reno wanted that money spent so she could tax it. Most of these guys want it to go overseas.

[JasonC]

Investing that much money in T-bills is a collosal waste. Any businessman with half a brain knows it. They can pay it out as a divided if they don't know what to do with it - but it is a sign that they don't, and the reason the stock is dead in the water. Stock prices rise because companies have opportunities for new investments that increase their value in the future, not because a 30 year old investment is still paying. The latter makes for a stock price level, not a rise. Rises come only from reinvestment. If the rate of return on marginal new investment at MSFT is 4%, its a dog.

[Golden Eagle]

They're already paying huge dividends, almost $20 billion a year for four years that started in 2004.

http://seattletimes.nwsource.com/html/businesstechnology/2001983997_webmicrosoft20.html

There's just not much else that can be done to help the stock. Microsoft has saturated the tech industry with its products, and the stock market with its stock, and there's little room for growth. There's little REAL growth for anyone in tech right now, as the Asian companies now have a lot of our technology and are coming on strong. Microsoft's defensive posture actually makes perfect sense.

[JasonC]

Plenty of tech companies are growing just fine. Google is not obviously sitting still. Apple is not obviously sitting still.

MS could be giving us something new, as many others are, but isn't. Doesn't have the imagination apparently. Instead they try to take everyone else's ideas and then do them badly.

[CWOJackson]

MS is a victim of it's own stupidity and success.

When ISP's were popping up Microsoft initially decided to not invest in that area despite urging by engineers. Why? Paul Allen insisted that the Internet was a passing phase.

On the flip side, they did produce a great business duo with NT and Office. The problem of it is NT 4.0 and Office 98 were decent products and sufficient to most corporate needs; why pay the high cost of upgrading (which in many cases would also involve hardware upgrades) when your network/office suite is perfectly sufficient? The only way MS could get many businesses to move on was to discounting support for the older versions which didn't win them friends.

[anymouse]

Maybe they need a software patch for their earnings?

That's not a MS stock price decline, it's a investment feature. /sarcasm