Don't Sell on Microsoft Vista's Poor Reception

| About: Microsoft Corporation (MSFT)

Microsoft’s stock (NASDAQ:MSFT) has dropped steadily since Vista was introduced a few weeks ago to much fanfare – but disappointing consumer response. This did not surprise us (though it apparently surprised others), as we did not expect consumers to upgrade their current computers, but rather upgrade to Vista upon the purchase of a new computer.

What’s important to us from an investment standpoint is that we believe Microsoft has entrenched one of its most important businesses for an additional few years, and that virtually every new computer sold in the world going forward will have Vista pre-installed on it.

We continue to estimate that Microsoft is worth $35-$40 (vs. today’s level under $27.50) and that the major new software releases (Vista, Office and server software) will drive a jump in profitability – and the stock price.