

IBM passes Microsoft’s market cap - rickdale
http://money.canoe.ca/money/stocks/international/archives/2011/05/20110524-075940.html

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pnathan
This is a very bad point for Microsoft. They have a tremendous stable of
researchers, tremendous market dominance, fairly solid software, and they seem
to be unable to capitalize on that.

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tybris
What do you mean unable to capitalize? They have a 32% profit margin (for
comparison, Apple has 22%) and their dividends are considerably higher than
the interest on your savings account.

Why should they care about their stock price? It's not like they're in dire
need of a stock emission. They have a cool $20 billion in annual profit
flowing in. Their employees won't mind that much either, since a low stock
price means they get more shares and with a P/E ratio of under 10 they're
likely to go up eventually.

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hugh3
_Why should they care about their stock price?_

Ultimately, they should care about the stock price because raising the stock
price (or, more directly, the value of the company) is what we (the
shareholders) pay them (the management) for.

"Here you go" say the shareholders (via the board) to the management. "Here's
a freaking huge salary. Now go find ways to make my company bigger."

That doesn't mean they should care about day-to-day fluctuations in the share
price, but certainly ensuring long-term growth in the share price is exactly
what we're paying 'em to do.

(And I don't know why I used "we" all through there, because I'm not actually
a MSFT shareholder.)

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code_duck
Microsoft pays dividends, at least.

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hugh3
True, but only 2.65%, which isn't enough to justify zero growth.

Actually I'm looking at the historical MSFT price right now, and it's
interesting. Of course they had huge growth in the 90s, hitting twice its
present value at the end of '99, before rapidly crashing back down to its
present value by 2001. It's been flat ever since. In 2003 the company said
"Screw it, we might as well pay dividends" and they've been putting out a
slowly-increasing dividend ever since. Other than that, the lack of change
over the last decade has been remarkable.

Interestingly, 2000 was also the year that Ballmer replaced Gates as CEO.
Maybe what Microsoft really needs is a CEO with some vision.

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nolok
2000/2001 was also the years of the dot com bubble where every tech company
tanked in some way. I think this has more to do with it than Ballmer's arrival
(it was the time of the hugely successful and popular windows 2000 and XP,
ballmer's damage if any would only be seen years later).

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code_duck
That was a lousy time to take over as CEO, true. However, the next decade has
had plenty of opportunity - Google went from not much to a $500 billion
company, and Apple went from dying to dominant. With a CEO who had a full
vision, they could have added huge amounts of value to the company since then.
Instead they've been coasting along and taking wrong turns.

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brudgers
Those once again predicting Microsoft's doom might keep in mind that Microsoft
remains highly profitable and that 20 years ago pre-internet pundits were
greatly exaggerating rumors of IBM's death in the wake of multibillion dollar
losses.

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raganwald
These types of articles are a serious problem. Stock prices reflect confidence
in a company. The underlying "fundamentals" are only relevant insofar as they
drive investors to buy and hold the stock. Negative articles about a company's
business performance depress the stock by convincing investors that other
investors will sell the stock.

But articles like this are a kind of gut-shot: They directly state that
investors don't like the stock. This kind of thing can accelerate a stock's
fall from grace, leading to more negative articles, more bearish sentiment,
and the whole thing becomes a vicious cycle.

This is very different from an article being bearish about the company's
management or products. You can hire new managers. You can fix broken product,
buy new products, or develop new products. But you can't buy investor
confidence (as Microsoft has proven with their dividends).

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aheilbut
Apparently those dividends and the underlying "fundamentals" do buy something,
because the company is still worth $200B.

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raganwald
I guess they do. How much of that stock do you own? I made the mistake of
selling mine in the late nineties.

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aheilbut
No position, and I don't like the stock, but my point is that the fundamentals
do matter. MSFT remains a very large and profitable company, and it is at a
stage where that influences valuation much more than sentiment does.

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raganwald
And my point is that the fundamentals matter insofar as they drive investor
beliefs about other investors. I think what you are saying and what I am
saying are compatible. As to whether their "fundamentals" will outweigh a
decline in confidence brought about by this kind of negative press coverage...
If I knew what would happen for sure, I could make a comfortable living as an
investor.

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smackfu
These are such lazy articles to write.

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bane
_The move marks another unhappy milestone for Microsoft, which has failed to
persuade investors that it can dominate the future of technology as it did in
the past, and has seen its share price stagnate over the past decade._

I'm sure much of that has to do with not just failed products, but a lack of
fortitude in sticking behind products, advertising them effectively (building
the brand) and growing them into the "next big thing".

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thomasgerbe
This guy also has something to do with it. Maybe.

<http://www.youtube.com/watch?v=lVMy0PFr8no>

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bane
Well, he's definitely the root cause I'd wager.

Perhaps not a bad CEO, but the wrong CEO for this company right now. He'd
probably do better at a place like GE.

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tybris
Time to buy MSFT then.

