MSFT as an investment, as a company

[DanS]

The shine has been off of Microsoft's stock for the last several years, so I thought it would be a good time to take a look at the company.

Among the litany of items that we may wish to consider...
$40 billion in sales per annum
Extremely steady revenue
~10-15% annual revenue growth
32% net profit margin
Price-to-Earnings of 18.37
$35 billion in cash
No debt
4 product lines (operating systems, business software, XBox, and MSN)
New product offerings in 3 of the 4 product lines
Monopoly in 2 of the 4 product lines (operating systems and business software)
Gaining ground fast in XBox
Losing ground fast in MSN
Capital expenditures on MSN expected to increase substantially
Anti-trust concerns worldwide and litigation in Europe

It seems to me as if the company is adrift, but still has a solid buffer around at least 2 of 4 product lines. If I were an investor, I would prefer that the company not spend so much on MSN in order to out-Google Google. Microsoft is not primarily an ads-driven company, so I wonder why it is so scared of Google.

http://finance.google.com/finance?fstype=ii&cid=358464

[MRT144]

it needs more debt!

[Dauphin]

Debt is good.

Mars has no debt either, shame on them. Then again, Mars is not a quoted company.

[MRT144]

debt is good because its cheap!

[laurentius]

How did you come to conclusion that MS is gaining ground fast in MSN and Xbox?

[DanS]

Losing ground fast on MSN, not gaining ground fast. Gaining ground fast in the XBox due to a fairly smooth rollout of the 360.

[Shi Huangdi]

I believe there was a poll out recently showing that MSFT is the least trusted comapny in the US. I'd be concerned that when people upgrade computers in the future and consider Vista, that a number of them might decide they have had it and switch to Mac.

[DanS]

Unfortunately, nothing runs on a Mac.

But I will add anti-trust concerns to the list above.

[laurentius]

Oh yes you are right...and suddenly it sounds more reasonable.

I would say its hard or close to impossible to make any conclusions about Xbox360s sales performance before this time next year. Afterall MS has only sold what 5 million units up to now while Sony is planning to have 6 million units on the market by the end of 2006. So its gaining ground due to it being the only next gen console on the market atm, and even at that its not selling as fast as it could/should. It seems like some people are holding out until Wii and PS3 are out pretty much in the sense how Apple sales have suffered when people have been waiting for the intel versions.

Otherwise MS looks pretty good based on the numbers alone. The next gen consoles mediacenteresque appearance might be eating its share in PC software in the future though. I think we might soon be in a situation where TV isnt that flickering eyesore anymore its now thanks to HDTV LCD screens and the consoles especially PS3 will be rather cheap all round PCs after you have bought the mouse and keyboard for it. Its running linux so someone will surely port open office to it. Maybe PCs will be reduced back to being the old strickly for work only computers..

[laurentius]

"mediacenters are the growing trend"

[DanS]

I think XBox Live may also do better than expected. Early reports are unexpectedly positive. That would be very lucrative, if it is successful.

[laurentius]

AFAIK Xbox Live is subscription based and the PS3 network is supposed to be free. That's got to work for PS3s favour.

[DanS]

As I have heard it, the PS3 network is quite poor in comparison, however. This wouldn't surprise me, as I also hear horror stories about Sony Connect.

[MRT144]

DanS is an Asher DL

[Kuciwalker]

Originally posted by laurentius
AFAIK Xbox Live is subscription based and the PS3 network is supposed to be free. That's got to work for PS3s favour.

The basic version of Live is free, and the upgraded version is a subscription ($50 a year).