# Microsoft (Upside potential?)



## LionMG (Dec 21, 2012)

I'm looking at US dividend blue chips for my RRSP and Microsoft really interests me. It's for the low-risk portion of my portfolio and I plan to hold long-term, unless of course the stock skyrockets. Which is the main part that really intrigues me. It's remained stagnant for a long time, but isn't there a strong possibility it can have a breakthrough eventually? With all the cash they have to throw around and the investments they're making.

If it never happens, well at least I'll be receiving a pretty decent dividend!

My gut tells me to get in now while the price is right.


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## Jon_Snow (May 20, 2009)

New xbox coming as well... and it could be a monster... I might be one of the nerds standing in line for one. :tongue-new:


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## Just a Guy (Mar 27, 2012)

It hasn't done anything during the years they dominated the market, what makes you think they will move as they continue the downward slide into irrelevance?

Not saying it's a bad company, but they certainly aren't as important as they used to be, and haven't had any major success in years.


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## doctrine (Sep 30, 2011)

I've always thought that a 5 pack equal weight of the big US technology companies would do well - Apple, Microsoft, Cisco, Intel and Google. Only Google is left to start paying dividends, which they probably will in a couple of years. Remember, Microsoft has been stagnant because of their big P/E in the late '90s, not because of decreasing profits or profit margins.


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## Argonaut (Dec 7, 2010)

Sell puts a few bucks below strike. If you're assigned, sell calls a few bucks above strike. This is a meandering stock without much upside or downside so this is how I would play it.


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## andrewf (Mar 1, 2010)

Jon_Snow said:


> New xbox coming as well... and it could be a monster... I might be one of the nerds standing in line for one. :tongue-new:


I think the console market is ripe for a shakeup. Steam is increasingly moving toward linux support for games it distributes, and there are (confirmed) rumours that they are developing a linux-based console. Then there is the Ouya android based console from kickstarter...


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## brad (May 22, 2009)

Just a Guy said:


> It hasn't done anything during the years they dominated the market, what makes you think they will move as they continue the downward slide into irrelevance?


I would agree with this. Windows 8 is excellent but isn't getting a lot of sales, same for Windows 8 phone, and MS Office is starting to lose market share to Google as more and more big corporations switch to Google Docs. They need something a lot bigger than xbox to reverse their overall trajectory.


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## m3s (Apr 3, 2010)

2011 article about Xbox



> Microsoft is debating whether the next Xbox has to be profitable on a per-unit basis from the day it's released, or whether the company can afford huge subsidies as it did with the first two consoles.
> 
> The business model for the Xbox has always been to create cutting-edge hardware and sell it at a loss to establish dominance, then hope to sell enough games and Xbox Live subscriptions to cover the investment.
> 
> ...


Msoft dumped a fortune into Xbox just to get into that market. Paying developers $$$ for exclusives etc. It was only profitable for a few years in the middle, losing money again now. A lot more kids just play games on phones, tablets, computers instead now

I've seen European companies using open source software and Google instead of always paying for upgrade Msoft. They charge too much really, and Google docs is far more innovative now..... as is their mobile OS etc. Less people are upgrading to Windows 8 than they did Vista

Old tech can be dangerous, watch out for intel as well


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## andrewf (Mar 1, 2010)

2012 was probably the year when linux became the dominant OS. Linux has dominated servers for a long time, but now dominates mobile (Android), now all that remains is the desktop. Google is pushing their Chrome OS, and I think more hardware makers will consider selling with Ubuntu rather than Windows. This will be especially true once software developers embrace linux for applications like games. MSFT may be forced to sell their office suite for linux to protect their marketshare, and once that happens, many businesses have no reason to stick with windows. 

MSFT's moat keeps on silting in, and I don't see how they can defend it.


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## kcowan (Jul 1, 2010)

Wow this suggests that Win8 and Surface are the "hail mary" pass! Pretty scary...


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## ddkay (Nov 20, 2010)

Office for Mac sucks. I can't imagine a Linux port being any better. I think they purposely bloat it up and make it run slow so everyone goes back to Windows.


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## LionMG (Dec 21, 2012)

Interesting...

What would it take for Microsoft stock to skyrocket? What made Apple start to skyrocket, just the iPhone? Forgive me for the stupid question - I'm new to individual stocks and never really paid attention to tech. All I know is I've used a desktop all my life and I've started researching Microsoft. 

Assuming it was mainly the iPhone initially that launched the Apple stock, would it then just take Microsoft to release a wildly successful, innovative product to turn things around? 

With all of the seeds they're planting in developing countries, the eco-system they're building between devices with Windows 8, the retail stores ala Apple, and tons of money to throw around into future innovation (plus paying companies to roll out with Windows on their devices)... are the chances of it really that bad for a breakthrough?


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## jamesbe (May 8, 2010)

The problem is as you described it. They are "following" not really innovating. The tablet and phones are 2 years too late. Paying people to make your software popular use to work, I'm not sure it does anymore. You need to be innovative.

The iPod was what saved Apple. Then they started targetting the hipsters with excellent design and the ecosystem for iPhone and iPod and Apple. Selling music one song at a time with iTunes has made them millions (billions?). These were innovative ideas, they were first to the table.

Not sure Apple can keep going up and up either. They have lost market share on the iPhone but still have a huge chunk. Windows phones are like 5% of the market, Android 75% and iPhone 15%.


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## Lephturn (Aug 31, 2009)

Yes I think the chances are slim to none for a breakthrough that would "move the needle" for Microsoft. What they need is solid growth. The product that started this for Apple was the iPod and then the iPhone - but what mattered was that they opened up new markets/categories with each major release leading to insane sustained growth rates with fabulous margins. What would it take for Microsoft to do something similar? Well they would have to show they could do this in another category, and so far they have rarely done so. Only their move into the server market really worked IMO. XBOX? Doesn't really make money - and that's the one that "worked". They are doing OK with Azure in the cloud, but they are #3 to Amazon and GOOG.

I'm selling options premium in Microsoft and I don't think anything is going to make it jump around enough to hurt me too bad.


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## bgc_fan (Apr 5, 2009)

kcowan said:


> Wow this suggests that Win8 and Surface are the "hail mary" pass! Pretty scary...


It doesn't suggest that it is the Hail Mary pass. It is a Hail Mary pass. PC sales have been slowing down ever since the advent of the netbooks, a market MS killed with the OS requirements of Windows and their philosophy of shoehorning the same OS onto every platform.

With tablets and smartphones being the new waves, MS has no control or way of locking users into the MS ecosystem. 

Basically MS is dependent on forced upgrades to the Windows OS and MS Office from the corporate world to be profitable. 

Not exactly a growth company by any means. At least Google and Apple are somewhat successful when trying new markets, but MS has never been successful outside of their core business. I mean who here remembers or bought a Zune?


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## andrewf (Mar 1, 2010)

I see two options for MSFT:

-muddle along with slowly declining margins and marketshare
-collapse in key businesses (Windows and MS Office)

I think there is a lot of inertia behind Windows, and it will take a long time for business to migrate away from it, but the move to cloud computing is a big threat. Office is the key piece keeping users, especially business users, on Windows. If Office loses critical mass to Google/Open Office, then both Office and Windows are in trouble.


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## ddkay (Nov 20, 2010)

I don't think productivity apps in the cloud will ever gain much momentum. You can't make web apps as quick or complex as standalone app. In Office 2013 I read they changed the default save location to SkyDrive so there is a push to help people prevent data loss without switching to products that offer that like Google Docs. However it still has a huge advantage over Google Docs because you can always have a local cached copy of your documents in addition to the backup.

Now if Google Docs suite creates standalone apps, watch out. For now MS has a small moat. I think they have all their bets on Windows Phone right now. I'm not really a fan but it is getting some traction in the US.


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## HaroldCrump (Jun 10, 2009)

MSFT has a 15 year return of 5.04% _including dividends and splits_.
Can be called anemic, at best.

And anyone that bought and held since the tech boom highs, have made less than GIC returns.

IMO, this is now one of the dogs of the tech. sector.
In fact, it is a manufacturing and retail products company and should not be considered a technology company any more.

A 3% yield is not enough to buy-and-hold a no growth behemoth, subject to all the vagaries of the technology sector, in addition to global recession and uncertainty.

Argo's suggestion of OTM puts and OTM calls is perhaps the best way to squeeze blood out of this rock.


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## andrewf (Mar 1, 2010)

ddkay said:


> I don't think productivity apps in the cloud will ever gain much momentum. You can't make web apps as quick or complex as standalone app. In Office 2013 I read they changed the default save location to SkyDrive so there is a push to help people prevent data loss without switching to products that offer that like Google Docs. However it still has a huge advantage over Google Docs because you can always have a local cached copy of your documents in addition to the backup.
> 
> Now if Google Docs suite creates standalone apps, watch out. For now MS has a small moat. I think they have all their bets on Windows Phone right now. I'm not really a fan but it is getting some traction in the US.


Very little is stopping google from doing this. To the extent that you have local disk space available, it makes sense to use a local cache.

On the other hand, there is Open Office, which is already good enough for a large % of corporate users.


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## kcowan (Jul 1, 2010)

andrewf said:


> On the other hand, there is Open Office, which is already good enough for a large % of corporate users.


Being retired, I have no reasons to have the latest MS product. I have starter versions (free) of MW Excel and Word that handle most things and OpenOffice for more complex stuff.


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## protomok (Jul 9, 2012)

LionMG said:


> I'm looking at US dividend blue chips for my RRSP and Microsoft really interests me. It's for the low-risk portion of my portfolio and I plan to hold long-term, unless of course the stock skyrockets.


If you're looking for low risk and long term I don't think MSFT is the best choice. Even with the dividend, most of their business units are the middle of a massive shift. Desktops (and laptops) sales are rapidly declining, cloud services like Google Docs are going to keep pressuring their Business Division. Windows Phone 8 obviously has some competition from iOS, Android, etc. Windows Phone 8 and Xbox have major potential, but I think there is too much risk to put them in the low risk category.

Personally, for low risk and long term the only U.S tech companies I hold are silicon companies. Check out companies like Qualcomm who make processors and modem chips for Handsets and Tablets...a market which has a good chance of growing over the long term. They have more 4G patents than any other company and generate around 35% revenue just from licensing their technology! Texas Instruments is another good chip maker, plus they have a 2.6% dividend.


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## PMREdmonton (Apr 6, 2009)

If you`re looking for US tech companies I like Intel right now because:

1. It is out of favour
2. The death of PCs and laptops has been overstated
3. They have far superior manufacturing capacity compared to anyone else
4. They spend a ridiciulous amount of money on R&D and will eventually become dominant in chip space now that they have set their focus there. They just need to focus on energy conservation instead of computational power
5. They are very dominant in chips for servers and all those mobile devices need computational power in the cloud that Intel provides
6. They have a lot of cash
7. They earn a lot of money
8. They don`t have any meaningful competition in PC and laptops anymore and that will give them some breathing space to take on the mobile chip business.

It`ll be an interesting fight and the market has entirely counted them out and I don`t that is accurate.


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## 44545 (Feb 14, 2012)

LionMG said:


> ...What made Apple start to skyrocket, just the iPhone?...


Apple's brilliant play was to design devices that were completely independent of corporate IT.

The problem with being dependent on IT is that there are more people in the decision making chain - from the CIO to the CFO to the IT managers to the end users - who can impose conditions that make selling your product to them a costly nightmare.

Apple completely bypassed that by making a device _individuals _bought. Now, you hear the term "bring your own device" (BYOD) all the time and I'd credit Apple and the iPhone being the catalyst for that.


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## m3s (Apr 3, 2010)

PMREdmonton said:


> If you`re looking for US tech companies I like Intel right now because:
> 
> 1. It is out of favour
> 2. The death of PCs and laptops has been overstated
> ...



You make some good points, and intel is maybe a bit undervalued right now. I think their past revenues could really dry up in the near future though

1. The stock price has barely changed for better or worse since the dot com bust?!.. (Same could be said for Msoft!)
2. People won't be replacing PCs and laptops nearly as often, and they won't be spending nearly as much (tablets and phones are replacing laptops and pcs for many things except for keyboards)
3. Yes they have manufacturing capacity, whereas everyone else outsources it to Asia. This is probably Intel's strongest point, competing with Taiwan's/Asia's stressed manufacturing!
4. All that R&D yet Steve Jobs begged Intel to make the chip for iPhones and they were clueless. Now that ship has sailed, and now Apple and Samsung are designing their own chips for years. Even if Intel catches up on years lost and makes a superior chip... Apple and Samsung are making chips tailored specifically to their devices already
5. Computational power is not the real need here, I think it's the network infrastructure (Qualcomm) What I mean is, it's easy to compute stuff relatively fast as the network can transfer it. We need more efficient and cheaper processors not expensive high performance ones
6. So does Msoft
7. In the mobile space now they have to compete with ARM architecture or pay to use ARM architecture. There's no room left for the margins they demanded from PCs
8. There's no point to make PC chips faster and faster so there's less reason for people to upgrade anymore

So many people say iPhones and smartphones are a rip off... people used to pay more just for an Intel chip! They were as much of a marketing firm as a tech (the little Intel jingle, the Intel inside sticker, the ingenious name "Pentium" because they couldn't trademark the number 586) AMD made perfectly good chips for a better price without the marketing prowess

I think Intel would have to heavily subsidize their mobile chips to get them into phones when companies can already design their own, have cheap ARM architecture dominating, and have it manufactured in Taiwan. The margins they had before are certainly gone


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