Go Ahead and Sneer, But Microsoft’s Windows 8 Could be Huge

Have you heard about the hot tech item for 2012 -- it’s the PC. Walt Mossberg, the closely followed tech columnist at the Wall Street Journal and an Apple (AAPL) devotee by all accounts, told readers recently to hold off buying a new laptop until the fall when there should be an exciting set of new offerings using Microsoft’s (MSFT) anticipated Windows 8 operating system.

The new Windows seeks, among other advances, to challenge Apple’s touch-screen functionality. Microsoft has been riding the wave of a revival in the much-maligned PC this year, as its stock has surged ahead of the broader market.

MSFT Chart

MSFT data by YCharts

Microsoft said shipments of PCs to businesses rose 8% and the PC market overall gained 2%-4% in its fiscal third quarter, which ended March 31. That’s faster than research firm Gartner had expected. For the first three months of 2012, Gartner had forecasted a 1.2% drop in PC shipments.

Despite the good news and the stock gain, Microsoft continues to be relatively economical compared to other tech giants, such as Apple, Google (GOOG), Oracle (ORCL) and Cisco Systems (CSCO).

MSFT PE Ratio Chart

MSFT PE Ratio data by YCharts

Compared to those firms that pay a dividend, Microsoft’s dividend yield is far superior.

MSFT Dividend Yield Chart

MSFT Dividend Yield data by YCharts

And while Microsoft warned Wall Street to expect higher expenses later this year to support Windows 8 and the new Office, it’s got lots of cash on hand to fund what some are calling the biggest product launch for the company in some time.

MSFT Cash and ST Investments Chart

MSFT Cash and ST Investments data by YCharts

Overall, revenue rose 6% to $17.41 billion in the fiscal third quarter, beating expectations of $17.18 billion. While net income fell 2.4% to $5.11 billion, earnings per share of 60 cents for the quarter was above Wall Street’s forecast of 57 cents.

Sales at its Windows unit rose 4% to $4.62 billion, versus expectations of sales of $4.2 billion, notching the fastest quarterly growth rate since the September quarter of 2010. Operating income in the Windows division gained almost 6% to $2.95 billion.

Meanwhile, the Office software division posted a 9% jump in sales to $5.81 billion as ongoing demand for Office 2010 continues to surprise analysts this far into its lifecycle and with a new version on the horizon. Operating income jumped about 14% to $3.77 billion.

Michael McHugh is an editor for the YCharts Pro Investor Service which includes professional stock charts, stock ratings and portfolio strategies.

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