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Steven Bulwa
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Steven Bulwa is an investment analyst with a focus on new developments in technology and the companies poised to benefit. He has contributed to, and,, and among others. Steven has actively followed... More
  • Why Would any Investor Buy Microsoft? 0 comments
    Nov 27, 2010 5:22 PM | about stocks: MSFT, CRXL, SSYS

    The Stock Hasn’t Moved in Over a Decade

    Mister Softee, as once affectionately coined, truly has been that in terms of stock performance. Totally flaccid and potentially impotent. The stock hasn’t moved (except maybe slightly lower) in over a decade. Yet, while other companies are roaring by, analysts continue to be riveted by MSFT. 32 analysts have calculated earnings projections for MSFT’s current quarter and year according to Yahoo finance. Stratasys (NASDAQ:SSYS), a top pick is up 10x over the last decade and according to Yahoo finance, 6 analysts offer earnings estimates on this company. This is efficient market theory illustrated to perfection.

    This ridiculous misallocation of research capacity on Wall Street is why there is such tremendous opportunity. While everyone is researching and documenting non-events in the world of dormant large cap technology, a fascinating group of emerging technology companies like Stratasys and longtime pick and recently acquired Crucell (NASDAQ:CRXL) are forging ahead without much notice. It is our mandate to exploit this inefficiency and discover the best new technology companies.

    With great new growth companies to invest in I truly don’t know why anyone would own MSFT, for its paltry dividend? I once again hear people calling for resurgence in MSFT’s stock. In 2006 after MSFT reporting earnings there was similar positive sentiment around the stock with some calling for it to return to $50/share. At the time in response I wrote:

    I would not buy Microsoft here: The company has a huge uphill battle to fight. By achieving such greatness with Windows and basically becoming a monopoly, the market cap is an astronomical $250 billion. That is quite a base to start from — how big should it be on 6 times revenues and 20 times earnings? Plus, the company will never again have a market to itself. In all its new markets, there are numerous nimble and worthy competitors. I believe it is all downhill from here.

    At $50 Microsoft would sport a market cap of $500 billion. At the current 5 times revenues it would need to achieve revs of $100 billion to support that valuation. That is more than double today’s number. When is that realistically going to happen? At the current growth rate of 11%, that could happen sometime in 2014 if the company is able to maintain it. The bigger a company gets, the tougher that becomes — there aren’t very many $100-billion-revenue tech companies. Lowly IBM once a growth star, has almost $100 billion in revenues, yet curiously, its market cap is half of Microsoft’s.

    I think that just about sums up my feelings about the stock today. The more things change the more they stay the same.

    Disclosure: none

    Disclosure: none
    Stocks: MSFT, CRXL, SSYS
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