The first big retail story of Christmas 2012 is in. Microsoft (MSFT) is Shelly Adelson.
By that I mean that, despite dominating the airwaves with its advertising, Microsoft is losing Christmas to Apple's (AAPL) relentless ground game. Analyst Gene Munster camped out at competing Apple and Microsoft stores on Black Friday, and found the former greatly outperforming the latter, even though the picture on this CNET story shows a crowd at the latter.
The biggest problem for Microsoft is its Surface convertible, which is drawing some horrible reviews. In addition to this dump, by Jason O'Grady of ZDNet, I read a series of tweets from Danny Sullivan, the respected editor of Searchengineland, as he fought with his Surface over Thanksgiving and finally gave up on it.
If Microsoft is saved this Christmas, it will be by its OEMs. Dell (DELL) reportedly had the best-selling all-in-one at Black Friday, and if I were forced to arbitrage between Dell and HP (HPQ), its largest U.S. rival, I'd buy Dell and sell HP in a heartbeat.
Microsoft shares have been trying to rise from a base of $27 since the 23 cent/share dividend was paid out in the middle of November. The stock was falling into that event, from its previous base near $30/share. The company is still worth more than IBM (IBM), but the margin has shrunk to $12 billion and over $25 billion in market cap has disappeared.
The question is whether you should be taking losses here or hanging on. I bought 200 shares at the old baseline and I'm under water, but I'm hanging in for now because I expect Windows Server sales to save Christmas. But if they don't, and we'll know the answer to that next month, I'm taking my losses and getting out.