Microsoft (Nasdaq: MSFT) reports fourth-quarter and year-end results tonight. The third quarter made my Foolish compadre Rick Munarriz think "stagnation!" and the never-ending give-and-take between Redmond and Yahoo! (Nasdaq: YHOO) ... well, it just never ends. Let's get a snapshot of Microsoft's challenges and prospects today.
What Fools say:
Here's how Mr. Softy's CAPS rating stacks up against some of its peers and competitors:
Market Cap (billions)
Trailing P/E Ratio
CAPS Rating
Microsoft
$255.1
15.9
***
International Business Machines (NYSE: IBM)
$171.3
16.3
***
Google (Nasdaq: GOOG)
$166.7
36.7
***
Oracle (Nasdaq: ORCL)
$105.2
19.3
****
Yahoo!
$31.3
30.8
**
VMware (NYSE: VMW)
$14.7
65.1
***
Data taken from Motley Fool CAPS and Yahoo Finance on 07/17/2008.
"This stock is due for movement," says CAPS player Richardl1130, supporting his bullish rating of Microsoft's stock. "lowering the xbox pricing, striking agreements with Netflix (Nasdaq: NFLX), showing they are not afraid to go after Yahoo. They need some action with the stock and will make short term gains by whatever means necessary." Let me just note that a strong share price comes in handy for expensive stock-swap acquisition deals.
But the bears have a response or two ready. "Microsoft is currently too big to expand significantly above where they currently are," says all-star Fool simultaneouslee. "Also, with Bill Gates no longer involved in Microsoft and the more eccentric Steve Ballmer running the show on his own, not as many investors will be inspired by Steve Ballmer's visions for Microsoft as they were Gates."
Again, a quick note: Gates is no longer a Microsoft employee, but he remains chairman of the board. Ballmer is not entirely on his own.
What management does:
Microsoft's margins remain as fat as ever, and most large companies would be quite happy with these growth figures. With a 15.9 trailing P/E ratio, Microsoft stacks up nicely against competitors with a higher multiple.
Margins
12/2006
3/2007
6/2007
9/2007
12/2007
3/2008
Gross
79.4%
80.7%
79.1%
78.4%
80%
79.3%
Operating
36.6%
39.1%
37.2%
37.9%
40.7%
36.8%
Net Continued... |