- Evercore's Kirk Materne, who upgraded Microsoft (MSFT) to Overweight today, thinks the company's Office and Server & Tools divisions are worth a combined $24-$26/share by themselves.
- His estimate assigns a P/E of 11-12 to the businesses on 2014E EPS of ~$2.15, factors in a gross margin hit from the shift to cloud services, and is said to include "fairly conservative assumptions" for consumer Office division revenue (~15% of total).
- After throwing in $6/share in net cash (30% tax rate assigned to offshore cash), Materne considers downside risk to be "fairly low" for Microsoft in spite of its well-publicized Windows woes. Particularly since Office/S&T revenue streams have largely shifted to subscriptions/annual licenses, and FY13 billings for the divisions respectively rose by 3% and 9% in the face of soft server and consumer PC sales.
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