Microsoft down 11%, should Wall Street analysts be fired?
As of 1:42 this afternoon, MSFT is down 11% - that's a whopping $31 billion in market capitalization in one day
- to $24.24. One of the commenters
to my
post last night suggests that "we all just get out of all stocks and then "all stupid analysts can be
fired and work in the fields with the Mexican farm workers, because that's what they deserve !!"
While that makes me laugh uproariously with my buddies at the coffee shop, I really don't blame the analysts here. It's not like Microsoft has really given them precise figures to consider. And, in my opinion (and I'd argue, the opinion of those analysts, themselves), MSFT management strategies are murky at best. The Goldman Sachs analyst in last night's earnings call said it best, "It sounds like you're building a Google or Yahoo! inside the company." They're spending a few billion dollars more than expected (and, more than last year) on "cost of sales" and they're telling us that all that money is being spent on increased Xbox 360 costs. I don't think so. And neither does Wall Street.
Chris Liddell isn't going to tell us what's really going on, and my guess is that Softie is building, deliberately and at great developer expense, proprietary software to do what all their competitors are doing. They've already spent a ton on their own ad serving platform - is that only the tip of the iceberg? The answer, I think, is yes. What do you think should be done about the 11% drop in market cap? And are you considering this a buying opportunity? Or are you run, running as fast as you can?
While that makes me laugh uproariously with my buddies at the coffee shop, I really don't blame the analysts here. It's not like Microsoft has really given them precise figures to consider. And, in my opinion (and I'd argue, the opinion of those analysts, themselves), MSFT management strategies are murky at best. The Goldman Sachs analyst in last night's earnings call said it best, "It sounds like you're building a Google or Yahoo! inside the company." They're spending a few billion dollars more than expected (and, more than last year) on "cost of sales" and they're telling us that all that money is being spent on increased Xbox 360 costs. I don't think so. And neither does Wall Street.
Chris Liddell isn't going to tell us what's really going on, and my guess is that Softie is building, deliberately and at great developer expense, proprietary software to do what all their competitors are doing. They've already spent a ton on their own ad serving platform - is that only the tip of the iceberg? The answer, I think, is yes. What do you think should be done about the 11% drop in market cap? And are you considering this a buying opportunity? Or are you run, running as fast as you can?











Reader Comments (Page 1 of 1)
4-28-2006 @ 5:02PM
Brian Doyle said...
The Coke analogy might not be pretty apt, but I think 11% was a bit harsh. I don't especially mind the thought of them spending piles of money in an attempt to trump GOOG/YHOO, or just to move the needly by 2008.
4-28-2006 @ 5:16PM
Bob Fugate, Jr. said...
I never have fully understood why the market apparently reacts, or in many cases "over reacts" when stocks don't "meet analysts expectations" I've seen stocks get hammered over a penny a share. I think anyone who can forecast earnings within a penny or two has done a pretty good job when you consider today's economy and the millions of dollars in revenues involved. What I don't really understand is Microsoft's valuation. Afterall, they are probably one of the only major corporation in this country to waltz right through a recession like it never happened. And certainly the only major tech company to do so. I think the anti-trust suit grounded them and they never got back going with the stock price. How long can a $45 stock trade for $25?
4-28-2006 @ 6:18PM
Zev Melamid said...
I believe that an 11% drop in MSFT stock price in one day is highly exagerated. Such a solid company's shares should have been trading at a higher range than $25. I have no doubt that the combined financial and intllectual strength of MSFT will soon overcome the challenge of Google/Ebay/Yahoo.
4-28-2006 @ 8:19PM
Victor Shamanovsky said...
Understanding of Microsoft comes from understanding their product line up. 2007 collection like very promissing and considered by many "next big thing(s)". Pleanty of corporates will be upgrading. Things are looking good.
4-28-2006 @ 8:52PM
Sue Lemieux said...
So I'm curious, it seems like it's on sale, anyone buying (more)?
4-28-2006 @ 9:01PM
DANNY BOY said...
This is all about ramped up cap Ex. the market should see this as a blessing (Softee has enough coin to go around; Google should've sold off today and it didn't, which caught me off guard) but for some reason, investors are acting like MSFT doesn't throw off tons of cash. Softee is a cash cow. The stock is dead, but not for long. We all bought some on today's selloff. Expectations for the stock are ridiculously high. I believe that Dell and Softee will climb back in sync. Both are great buys at these basement level multiples. I see MSFT stock at $30 by Christmas.
4-29-2006 @ 5:30PM
bob english said...
Mer looks strong
4-29-2006 @ 5:32PM
bob english said...
down 2.5 What are the general thoughts Is this a buy Should be 100 by December
4-29-2006 @ 6:56PM
Cantrdr said...
MSFT should just buy YHOO. Get it out of the way, a quick fix is the only patience we have now. Vista 2008 anyone!!!
4-29-2006 @ 9:20PM
robert margules said...
at these numbers, MSFT definitely, in my opinion ,represents a buying oppertunity.It is the premier Tech company on which nearly all others operate from. I cannot understand why Wall Street doesn't give it the recognition it deserves based on growth, innovation, cash flow and again cash flow. I t in my estmation very undervalued.
4-30-2006 @ 12:13PM
robert paulsen said...
I bought 2000 more at 45.45 all the reserch i`ve done says this is a buy.
4-30-2006 @ 10:29PM
Mike said...
watch softee go down a few more points before you even think of buying. This is hardly a buying opportunity and to tell you the truth there are several other stocks in the industry that are worth a look over msft.
http://www.blogforcapital.com
5-03-2006 @ 4:33PM
Roger F. Phillips said...
Changing to MS Word from Word Perfect because of a tie-in with a law firm management system gave the Firm MS, crippled us, and then sent us packing. Thank you Mr. Bill.
Hope an ORCA dines on your buzzard bait body.
5-12-2006 @ 1:11AM
Bruce said...
Softies got a lot of things going at home and abroad
The company has money because they do it as right as possible. This stock as all agree are undervalued
by my estimates as much as 25-30 us dollars! Google has one revenue source and that looks like its under fire for fraud. What amazes me is that a Google can command 5-600 dollars with so much risk. Id pay 900 for softie before id paid 23 for google.
5-19-2006 @ 5:46PM
wanda said...
I have been watching msft for a while and it seems to me that anytime it goes under $25 should be considered a buy with minimal risk provided that you have low brokerage fees or even better buy direct with minimums per month and I would venture a guess that in ten years time, you will have a tidy sum.
5-26-2006 @ 1:33AM
Dave said...
Microsoft in the $22-$23 range is like stealing money from the bank. Look for a 12-month price of $28-$30. Buy, buy, buy. You will be quite pleased in the long term.