Microsoft Corp. (MSFT) Doing Well with Vista
With Vista, the first new operating system from Microsoft (MSFT) in five years, market participants are looking for insight into possible adoption rates. While we will continue to see data points coming out of Redmond, Washington, the Vista story will likely not pick up momentum until 2008.
Yesterday, Microsoft announced it sold 20 mln licenses of the Windows O/S in the first month of wide availability, topping some analysts' expectations. While one month does not make a trend, comparatively the pace of sales is running above the Windows XP program that sold more than 17 mln copies in its first two months. It should be noted, however, that XP went on sale six weeks after 9/11.
One argument is that Vista has prompted consumers to go out and buy a new PC, but we would contend it's too soon to make that type of judgment. For reference, Microsoft logs a sale when Vista is shipped to computer makers and retailers, rather than when a customer makes a purchase.
The key isn't just about the total sales figure, but the product mix. MSFT is hoping to sell a greater percentage of the pricier versions, which carry a heftier profit margin. This is where the potential for stronger than expected earnings growth is derived. MSFT did comment yesterday that indeed it has been selling more copies of the premium versions, with consumer sales outpacing businesses, but it wouldn't provide specific figures.
For its part, Microsoft continues to try and temper Vista sales expectations. Last month, CEO Steve Ballmer told analysts some estimates were "too high". Microsoft obviously is hoping to under promise, but over deliver and you certainly can't blame them for that given all that's riding on Vista's success.
We continue to hold the view that investors should be taking advantage of weakness in shares to add to positions. While we don't think the replacement cycle is the all-encompassing technological event it used to be, MSFT is heading into its strongest product cycle in years. Earnings are expected to grow roughly 15-16% for the next two years, for which the multiple is an attractive 19x.
--Kimberly DuBord, Briefing.com
Yesterday, Microsoft announced it sold 20 mln licenses of the Windows O/S in the first month of wide availability, topping some analysts' expectations. While one month does not make a trend, comparatively the pace of sales is running above the Windows XP program that sold more than 17 mln copies in its first two months. It should be noted, however, that XP went on sale six weeks after 9/11.
One argument is that Vista has prompted consumers to go out and buy a new PC, but we would contend it's too soon to make that type of judgment. For reference, Microsoft logs a sale when Vista is shipped to computer makers and retailers, rather than when a customer makes a purchase.
The key isn't just about the total sales figure, but the product mix. MSFT is hoping to sell a greater percentage of the pricier versions, which carry a heftier profit margin. This is where the potential for stronger than expected earnings growth is derived. MSFT did comment yesterday that indeed it has been selling more copies of the premium versions, with consumer sales outpacing businesses, but it wouldn't provide specific figures.
For its part, Microsoft continues to try and temper Vista sales expectations. Last month, CEO Steve Ballmer told analysts some estimates were "too high". Microsoft obviously is hoping to under promise, but over deliver and you certainly can't blame them for that given all that's riding on Vista's success.
We continue to hold the view that investors should be taking advantage of weakness in shares to add to positions. While we don't think the replacement cycle is the all-encompassing technological event it used to be, MSFT is heading into its strongest product cycle in years. Earnings are expected to grow roughly 15-16% for the next two years, for which the multiple is an attractive 19x.
--Kimberly DuBord, Briefing.com
Labels: Microsoft Corp., MSFT, VISTA
posted by Stock Administrator @ 8:57 PM
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