Microsoft's Big Announcement On Monday: Rumors Are Swirling

|
 |  About: Microsoft Corporation (MSFT), Includes: AAPL, ARMH, BKS, GOOG, LMCA, SIRI
by: Little Apple

Microsoft (NASDAQ:MSFT) is suddenly bursting with new life, and the rumors are swirling. The company has just announced that it will make a "major announcement" on Monday, and the press is invited. Everyone is speculating what this big news might be, but no one knows for sure. One source thinks it will be Media related since the announcement will take place in Los Angeles. Possibly a video link to the Xbox 360? According to an article on Saturday which had "Microsoft DOMINATES" in the title:

Microsoft shares increased 2.3 percent to close at $30.02; it was one of the Dow's best performers on Friday. The company has supposedly agreed to buy business social-networking site Yammer for $1.2 billion, reported The Wall Street Journal after citing an unnamed source.

But this possible news about Yammer may be overshadowed by speculation that Microsoft will announce plans about its first tablet on Monday. According to another WSJ article on Saturday:

At an event in Los Angeles Monday, Microsoft will announce plans for the first time to sell a tablet computer under its own brand, according to people familiar with the matter.

The device will use a version of its latest operating system called Windows RT that works on chip designs from Arm Holdings (NASDAQ:ARMH) PLC, these people said.

Another analyst agrees that the big news is tablet related:

Microsoft is mad as hell that Apple owns the tablet market and is not going to take it anymore. The company has issued invitations for a press event to take place in Los Angeles Monday, June 18, for what it calls a "major announcement." What could this huge announcement, scheduled with mere days notice, be? A Windows 8 tablet made by Microsoft, perhaps.

Yeah, you read that correctly. Not a tablet made by one of its many hardware partners, a tablet made my Microsoft itself. Heresy, you say? Perhaps, but not impossible.

In other words, Microsoft would make the software and the hardware. Could this involve Barnes and Noble's (NYSE:BKS) Nook Tablet and its new partnership with Microsoft? There had been some " internet chatter" that there could be some "Microsoft-Nook" news on Tuesday June 19th when B&N announces earnings.

If it is Media related, could it involve Sirius XM (NASDAQ:SIRI) satellite radio and Liberty Media (NASDAQ:LMCA) which owns a chunk of B&N and Sirius? Liberty CEO Greg Maffei did not deny that there could be a "tie-in" with Sirius and the new Microsoft - B&N High School tablets or laptops. In a recent article, I explored this, and the possibility of Microsoft "crushing" Apple (NASDAQ:AAPL) due to its new operating system, Windows 8. There are some analysts that feel that this will have the same effect on Apple that the original Windows had decades ago. After seeing the new Windows 8 at the Computex computer show in Taipei, analyst Kirk Yang with Barclays said it is "on par" with iOS":

Windows 8, PC makers hope, will be a game changer able to take on Apple in the market for tablets and ultra-thin laptops, and will spur consumers to buy new PCs.

With improved interface, touch functions and a range of applications, "it appears Windows 8 brings the user experience on par with (Apple's) iOS ecosystems," said Barclays BCS +4.87% Capital analyst Kirk Yang in a report after attending Computex.

Not everyone agrees. As with any new software, there are opponents to Windows 8. Many readers felt that the word "crush" was too strong, and I must agree. I did not mean to imply that Windows 8 would destroy Apple, however this new system will affect Apple. Other readers wondered why I did not mention Google (NASDAQ:GOOG), and how it relates to this "Tablet War". After all, the Nook currently has an Android system. Right now this is a big question mark.

If the new "Micro-Nook" has Windows 8, what happens to the current "Android Nook"? The readers are right, this could take business away from Google as well as Apple. Since 2009 Google has consistently beat Microsoft's share price. Will a new Microsoft tablet change that? Or will the company partner with Google through the B&N Android connection? The Sirius XM 2.0 Lynx is also Android based. That would be pretty far fetched. But Google is located in California, and both companies would love to "crush" Apple. The possibilities are endless, but most analysts think this announcement will be the unveiling of a Microsoft Windows Tablet with superior hardware that will rival the iPad. We will find out Monday.

Chart forMicrosoft Corporation (<a href=

After looking at the ownership of Microsoft, it is evident that there are very few retail investors. Currently, according to Yahoo Finance, 74% of the "float" is owned by Institutions and Mutual Funds, and 10% is owned by Insiders:

Breakdown

% of Shares Held by All Insider and 5% Owners: 10%
% of Shares Held by Institutional & Mutual Fund Owners: 67%
% of Float Held by Institutional & Mutual Fund Owners: 74%
Number of Institutions Holding Shares: 1905
Click to enlarge
Click to enlarge

Top Institutional Holders

Holder Shares % Out Value* Reported
VANGUARD GROUP, INC. (THE) 321,511,835 3.83 10,371,971,797 Mar 30, 2012
STATE STREET CORPORATION 300,231,310 3.57 9,685,462,060 Mar 30, 2012
FMR LLC 210,258,034 2.50 6,782,924,176 Mar 30, 2012
BlackRock Institutional Trust Company, N.A. 195,606,774 2.33 6,310,274,529 Mar 30, 2012
Capital Research Global Investors 181,428,017 2.16 5,852,867,828 Mar 30, 2012
Invesco Ltd. 172,764,175 2.06 5,573,372,285 Mar 30, 2012
Capital World Investors 130,080,400 1.55 4,196,393,704 Mar 30, 2012
Bank of New York Mellon Corporation 124,703,681 1.48 4,022,940,749 Mar 30, 2012
WELLINGTON MANAGEMENT COMPANY, LLP 121,358,061 1.44 3,150,455,263 Dec 30, 2011
JP MORGAN CHASE & COMPANY 108,434,385 1.29 3,498,093,260 Mar 30, 2012
Click to enlarge
Click to enlarge
Top Mutual Fund Holders
Click to enlarge
Holder Shares % Out Value* Reported
Powershares Exhg Traded Fd Tr-Powershares QQQ Tr, Series 1 99,460,674 1.18 3,208,601,343 Mar 30, 2012
VANGUARD TOTAL STOCK MARKET INDEX FUND 90,097,291 1.07 2,338,925,674 Dec 30, 2011
VANGUARD 500 INDEX FUND 66,851,584 0.80 1,735,467,120 Dec 30, 2011
SPDR S&P 500 ETF Trust 62,014,256 0.74 2,000,579,898 Mar 30, 2012
VANGUARD INSTITUTIONAL INDEX FUND-INSTITUTIONAL INDEX FD 61,140,260 0.73 1,587,201,149 Dec 30, 2011
INVESTMENT COMPANY OF AMERICA 53,740,500 0.64 1,733,668,530 Mar 30, 2012
GROWTH FUND OF AMERICA INC 42,953,900 0.51 1,385,692,814 Mar 30, 2012
WASHINGTON MUTUAL INVESTORS FUND 36,445,000 0.43 1,175,715,700 Mar 30, 2012
VANGUARD/WELLINGTON FUND INC. 35,871,900 0.43 1,138,574,106 Feb 28, 2012
COLLEGE RETIREMENT EQUITIES FUND-STOCK ACCOUNT 35,086,991 0.42 910,858,286 Dec 30, 2011
Click to enlarge

It is easy to see why the institutions continue to buy Microsoft. The P/E ratio is 11, and the forward P/E is 9.72. The target price ranges from a low of $20 to a high of $40, with the mean at $35 a share. The analysts ratings are: 14 - Strong Buy, 11 - Buy, 11 - Hold, and 1 - Sell, and it pays a dividend. Combine these strong numbers with a "major announcement", and I would have to agree that Microsoft is a Strong Buy.

Disclosure: I am long MSFT, SIRI.