Is Microsoft The Ultimate Value Trap?
Amit Chokshi, CFA • 90 Comments
Amit Chokshi, CFA • 90 Comments
Sep. 9, 2015, 2:12 PM
- "We believe the future of television is apps," says Tim Cook (AAPL +0.1%) just before he unveils a next-gen Apple TV set-top. "The television experience has been virtually standing still while innovation in the mobile space has been racing ahead. Today, we are going to do something about that."
- In-line with rumors, the new Apple TV features an App Store, a new OS (called tvOS), Siri and gaming support, universal content search, and a revamped remote with a Siri button and glass touchpad. Siri is emphasized - among other things, it can be used to control content, navigate the UI, and pull up info related (and unrelated) to a show.
- The set-top directly squares off against Roku's hardware, Amazon's Fire TV, and devices running Google's Android TV, and indirectly against gaming consoles. Pricing (not yet announced) has been rumored to start at $149.
- The iPad Mini 4 has also been (briefly) announced: It's said to feature the iPad Air 2's internals in a smaller form factor, and starts at $399. The iPad Mini 2's price has been cut by $30 to $269; the Air and Air 2 still respectively start at $399 and $499.
- Microsoft exec Kirk Konigsbauer (NASDAQ:MSFT) appeared on stage at Apple's event, demoing the use of Office iOS apps on an iPad Pro for corporate viewers. The use of the Pro's multitasking features and Pencil stylus have been shown off.
- Continuing a theme of making nice with rivals, Adobe (ADBE -0.2%) exec Eric Snowden has also appeared, pitching creative pros on the ability to do advanced photo/document-editing on the Pro via Adobe apps.
- As expected, the 32GB Wi-Fi-only iPad Pro will sell for $799. 64GB (Wi-Fi) and 128GB (Wi-Fi/4G) models respectively go for $949 and $1,079. The Smart Keyboard and Pencil accessories will respectively go for $169 and $99. The Pro becomes available in November.
- Apple livestream. Live blogs: The Verge, Engadget.
- Earlier: Apple unveils 12.9" iPad Pro, new Watch finishes/accessories
- Update (2:27PM ET): A 32GB version of the new Apple TV set-top will sell for $149, and a 64GB model for $199; the devices launch in late October. The current Apple TV will continue to be sold for $69.
Sep. 8, 2015, 7:02 PM
- Ahead of tomorrow's expected unveiling of a 12.9" iPad Pro, Microsoft (NASDAQ:MSFT) states Dell and HP will begin reselling its Surface Pro high-end tablet/convertible line and provide related support services.
- The deals are part of a broader Surface Enterprise Initiative meant to boost corporate sales - IT services giant Accenture is also a partner - and suggest at least two major PC OEMs have made peace with Microsoft's decision to compete against them via the Surface line.
- With the low-cost Surface 3 providing a lift. Microsoft's Surface revenue rose 117% Y/Y in calendar Q2 to $888M. A new high-end model - the Surface Pro 4 - is rumored to be launching this fall.
- Separately, Microsoft has confirmed its purchase of Adallom, an Israeli provider of cloud-based software for securing popular cloud/SaaS apps from the likes of Salesforce, Box, ServiceNow, Amazon, Google, and yes, Microsoft (Office 365/Yammer). Bloomberg and TechCrunch report the purchase price is ~$250M, less than the $320M previously reported by the WSJ.
- Microsoft: "Adallom expands on Microsoft’s existing identity assets, and delivers a cloud access security broker, to give customers visibility and control over application access as well as their critical company data stored across cloud services ... Adallom will complement existing offerings that Microsoft makes available today as part of Office 365 and the Enterprise Mobility Suite (EMS), including our recent Microsoft Advanced Threat Analytics release."
Sep. 4, 2015, 2:03 PM
- Microsoft (MSFT -2.8%) is "considering a multi-billion dollar revamp" of its Redmond HQ meant to "foster more collaboration among employees and attract young engineers," Bloomberg reports. High-profile architecture firm Skidmore Owings has reportedly been hired.
- Microsoft currently has ~80 buildings in Redmond covering about 500 acres. Bloomberg's report follows multiple reorgs meant to break down barriers between different product teams and make a certain org chart cartoon an anachronism. Apple and Google are both in the midst of creating new HQs.
- Separately, Microsoft has bought VoloMetrix, a provider of analytics software for gauging the performance of a company's workers and sales teams. Microsoft plans to integrate VoloMetrix with Office 365's Delve organizational analytics and content discovery service.
Sep. 1, 2015, 2:59 PM
- As usual, VMware's (VMW +0.5%) annual VMworld conference has been filled to the brim with product and partnership announcements. Among the most prominent: A deal with rival Microsoft (NASDAQ:MSFT) to create a new product (called Project A2) for managing and upgrading Windows 10 PCs.
- A2 leverages VMware's AirWatch enterprise mobility suite, and its App Volume app management software. VMware: "We believe that we are pioneering a unique approach in the industry with a combination of heterogeneous management and real-time application delivery that makes applications lightweight, easy to deliver and simple to consume for users using any device."
- Meanwhile, Nvidia (NVDA -3.8%) has announced Grid 2.0, a new version of its server-based GPU platform for powering virtual PCs/workstations. Grid 2.0 works with VMware's Horizon virtual desktop software, and supports up to 128 users per server (up from 64 previously).
- VMware's core vSphere virtualization platform has been updated to support integrated app containers (often seen as a threat to standard server virtualization) from Docker and other container platforms. Underpinning the solution is Photon, a platform for deploying and managing containers running on top of vSphere.
- Also announced: 1) EVO SDDC, a product for managing/deploying data center resources; VMware promises many traditional deployment tasks can be automated. 2) VSAN 6.1, a new version of VMware's storage virtualization platform that supports new data protection features. 3) Disaster recovery, database, and object storage services for the vCloud Air hybrid cloud platform.
- Baird's Jayson Noland has upgraded VMware to Outperform after attending the company's analyst day (held at VMworld). He calls VMware "the best positioned software infrastructure provider," notes management was positive about enterprise license agreement (ELA) demand, and "continues to see potential for increased alignment with EMC and potentially a spin-in designed to drive improved cost and revenue synergy."
- VMware is up slightly on a day the Nasdaq is down 2.3%.
- Yesterday: VMware rises after downplaying EMC downstream merger rumor
- Last year's VMworld announcements: I, II
- Analyst day slides
Aug. 26, 2015, 4:21 PM
- The Nasdaq has closed its latest ultra-volatile day up 4.2%. Chip stocks, hit hard in recent weeks amid China/inventory concerns, were among the standouts (SOXX +5%) during the rally: Big gainers included Nvidia (NVDA +7.5%), Skyworks (SWKS +6.9%), Qorvo (QRVO +5.9%), Xilinx (XLNX +6.3%), Analog Devices (ADI +7.1%), Linear (LLTC +6.1%), SanDisk (SNDK +7.4%), ON Semi (ON +6.2%), and Cavium (CAVM +5.6%).
- Cybersecurity plays and various other enterprise tech names also did well. Standouts included HP (HPQ +5.5%), Palo Alto Networks (PANW +6%), Rackspace (RAX +9.8%), Red Hat (RHT +5.9%), KEYW (KEYW +8.1%), Brocade (BRCD +5.6%), ShoreTel (SHOR +5.7%), Violin Memory (VMEM +14.7%), and Rapid7 (RPD +7.2%).
- In addition to HP, tech large-caps turning in big gains included Apple (AAPL +5.7%) Microsoft (MSFT +5.5%), Google (GOOG +7.7%), and Intel (INTC +5.5%). Google benefited from a Goldman upgrade.
- KEYW announced a CEO change yesterday afternoon. HP and Brocade are adding to last week's post-earnings gains. Skyworks/Qorvo peer Avago has posted an FQ3 beat after the close.
Aug. 26, 2015, 11:37 AM
- A little under a month after the OS formally launched, 75M+ devices are running Windows 10 (MSFT +1.8%), VP Yusuf Mehdi discloses through a tweetsorm. On July 31, Mehdi stated Win. 10 downloads had topped 14M over the first 24 hours.
- Also disclosed: Over 122 years of gameplay have been streamed from the Xbox One to Win. 10 systems, and the Windows Store has seen 6x as many downloads per Win. 10 device as it has for Win. 8 devices. The latter likely has a lot to do with the store's integration with the search bar found next to Win. 10's Start menu, and the ability to run Metro-style apps downloaded from the store on the traditional desktop UI.
- Microsoft has generally seen positive reviews for Win. 10. However, with the OS provided as a free upgrade to Win. 7/8 users, expectations for its impact on PC sales have been subdued. IDC forecast today global PC shipments will drop 8.7% in 2015 to 281.6M - an 11.8% drop was estimated for Q2 - and decline further in 2016 before stabilizing in 2017.
Aug. 24, 2015, 8:03 AM
- Tech stocks in the U.S. are sharply lower in early action after the sector fell just as hard as broad market averages in China and Japan. Tech heavyweights aren't getting spared amid the carnage.
- Google (NASDAQ:GOOG) -4.1% premarket to $587.31.
- Apple (NASDAQ:AAPL) -5.1% to $100.38.
- Microsoft (NASDAQ:MSFT) -3.9% to $41.41.
- Facebook (NASDAQ:FB) -3.4% to $83.05.
- Yahoo (NASDAQ:YHOO) -6.6% to $30.75 and Alibaba (NYSE:BABA) is down 8.7% to $62.26 as concerns over growth in China mount.
- The Nasdaq 100 futures contract is off 4.8%.
- Related ETFs: XLK, VGT, HACK, SOXL, FDN, GGT, TECL, USD, SMH, IYW, TDIV, IYZ, SOXX, ROM, XSD, VOX, SOXS, FTEC, TECS, RYT, PBS, PSI, IGV, QTEC, IGM, FXL, SSG, PSCT, IGN, MTK, REW, XTL, PXQ, FCOM, XSW, PSJ, PTF, LTL, TLL
Aug. 20, 2015, 7:08 PM
- Microsoft (NASDAQ:MSFT) accuses InterDigital (NASDAQ:IDCC) of violating a pledge to license its 3G/4G patents on FRAND terms, and claims the company has "engaged in an unlawful scheme to acquire and exploit monopoly power over technology necessary for companies to make 3G and 4G cellular devices."
- Microsoft has frequently sparred in court with InterDigital, as did Nokia before Microsoft bought the company's phone unit.
- In April, an ITC administrative law judge Microsoft phones infringe two InterDigital patents, and that InterDigital had fulfilled its obligation to offer to license the patents under reasonable terms. A commission ruling is expected on Aug. 28.
- IDCC -1.1% after hours to $47.85.
Aug. 13, 2015, 9:35 AM
- "Even with muted expectations for Windows...we believe positive company-wide gross profit dynamics coupled with expense control should enable gross profit dollars to grow faster than operating expenses in coming years," writes Stifel's Brad Reback, upgrading Microsoft (MSFT +0.3%) to Buy after downgrading to Hold exactly two years ago (shortly before Steve Ballmer announced he's stepping down).
- Reback adds he's "increasingly confident in continued growth in the Commercial division," and thinks Microsoft's Devices & Consumer ops will turn profitable following major Nokia division job cuts. 15% dividend hikes are expected in FY16 (ends June '16) and FY17.
- Previously: Barron's makes bull case for Microsoft
Aug. 6, 2015, 2:15 PM
- P-E firms Permira has closed its $5.3B ($48.75/share) acquisition of Informatica (INFA +0.4%), a deal first announced on April 7. Sohaib Abbasi will step down as Informatica's CEO, but remain chairman.
- Along with the deal's closing, Informatica has announced Microsoft (NASDAQ:MSFT) and Salesforce.com (NYSE:CRM) have become "strategic investors," taking stakes of undisclosed sizes in the data warehousing software vendor.
Aug. 3, 2015, 12:37 PM
- Suggesting Microsoft (MSFT +0.2%) will take a gradual approach to commercializing HoloLens (echoes of Google Glass?), Satya Nadella tells the BBC the first version of his company's augmented reality headset will ship "within the next year," and be aimed at developers and enterprises.
- Nadella: "We will have developer versions of it first, and then it'll be more commercial uses cases, and it'll evolve ... This is a five-year journey, but we're looking forward to getting a v1 out, which is more around developers and enterprises. It's in the Windows 10 timeframe, which means that it is within the next year." (video)
- Nonetheless, he reiterates HoloLens will ultimately target both consumers and businesses. "In general Microsoft's approach will be always this dual-use focus, or this multi-focus. What we can uniquely do is bridge consumer to enterprise ... In the HoloLens case, when I look at the interest, it's amazing how many are in hospitals, healthcare, retail. That's where I'm seeing the interest and we'll definitely go after it."
- Still no word on pricing. Nadella previously stated Microsoft plans to let 3rd-party OEMs create headsets based on HoloLens' underlying Windows Holographic platform. A HoloLens version of Minecraft is in development.
- Previously: Microsoft reportedly investing $100M in Uber
Jul. 31, 2015, 2:59 PM
- More than two months after the WSJ reported UBER is looking to raise $1.5B-$2B at a potential $50B valuation, the car-hailing giant has closed a ~$1B round valuing it at almost $51B - more than Netflix, GM, FedEx, and many other S&P 500 companies.
- The WSJ reports Microsoft (MSFT - recently sold Bing mapping/image-collection assets to Uber) is an investor in the latest round, along with Indian media conglomerate Bennett Coleman & Co. The new funds could help pay for big upcoming investments in China and India.
- Update: Bloomberg reports Microsoft is holding talks to invest in Uber at a $50B valuation, but hasn't yet made a decision.
- Update 2: Bloomberg has updated its story to state Microsoft has agreed to invest $100M in Uber at a ~$50B valuation.
Jul. 31, 2015, 12:30 PM
- Over 14M copies of Windows 10 were downloaded in the first 24 hours following its July 29 launch, Microsoft (MSFT -0.2%) exec Yusuf Mehdi discloses.
- As announced months ago, the OS is a free upgrade to Windows 7 and 8 users ... including those with pirated copies. Microsoft has said pirated copies will continue to be labeled non-genuine/unsupported, but some have apparently been converted to genuine copies.
- Reviewers generally declare Windows 10 a major improvement over the oft-criticized Windows 8, though some recommend users wait to upgrade until lingering bugs are fixed. The Verge's Tom Warren (8.8/10) likes the revamped Start menu, Cortana/search integration, and the Xbox app (allows Xbox One games to be streamed). "Everything about Windows 10 feels like a new approach for Microsoft ... I rarely touch my MacBook Air anymore..."
- Ars Technica's Peter Bright is a fan of Windows 10's notification center, Continuum feature (allows apps to have both touch and keyboard/mouse UIs), and support for touch-friendly Metro apps on the traditional Windows desktop. He calls the new Edge browser "tremendously promising" on account of its speed, stability, and streamlined UI, but adds it's "severely feature-deficient" for the time being.
- Slate's Will Oremus: "[Windows 10] is, as of today, the most versatile and forward-looking operating system in the world. That’s because it is the first to recognize and embrace the future of computing: a world in which all your devices are just different-sized screens running the same software ... Microsoft has embraced the convergence while respecting key differences between the mobile and desktop use cases"
- In tandem with the Windows 10 launch, Microsoft has rolled out touch-friendly Office Mobile apps for the OS.
Jul. 28, 2015, 2:28 AM
- Millions of computer owners will be able to download Windows 10 for free after tomorrow, marking the first time Microsoft (NASDAQ:MSFT) has given away its latest Windows version without a fee.
- While many believe the push is to keep users on board, it may also highlight a shift in the overall strategy of Microsoft, which is looking to reverse a four-year slide in PC sales.
- The software giant seems to now be moving away from making money just once - when it sells a fresh version of Windows - to generating long-term revenue by selling apps, Web-search ads and other add-ons.
Jul. 27, 2015, 6:57 PM
- Some of the biggest and best known U.S. businesses join the Obama administration in trying to build momentum for a deal at the climate change summit in Paris later this year.
- A dozen publicly traded companies - AA, AAPL, MSFT, BAC, BRK.B, KO, GM, GS, GOOG, PEP, UPS and WMT - committed to support a “strong" outcome in Paris, and made new pledges to take a variety of steps to tackle climate change.
- For example, Alcoa says it will reduce absolute greenhouse gas emissions in the U.S. by 50% by 2025, and BRK plans to retire 75% of its coal-fueled generating capacity in Nevada by 2019.
- In addition to company-specific goals, the White House says today's announcements total at least $140B in new low-carbon investment and more than 1,600 MW of new renewable energy.
Jul. 26, 2015, 4:30 PM
- Adobe's success in migrating its on-premise software base to cloud subscriptions - and the higher multiples afforded the company in response - could be a sign of things to come for Microsoft (NASDAQ:MSFT), argues Barron's in a bullish column that follows the software giant's FQ4 report and related selloff. Adobe, like Microsoft, was prodded to aggressively embrace cloud subscriptions by activist ValueAct Capital.
- Barron's adds Microsoft has a 2.7% dividend yield and trades at less than 16x trailing free cash flow vs. an S&P 500 average of more than 20. "A rise to $55 a share over the next year would leave Microsoft at 18 times trailing free cash flow, about where consumer staple heavyweight General Mills trades now." Of note: A shift to cloud subscriptions leads near-term earnings to be depressed relative to free cash flow, since subscription revenue is recognized just a quarter at a time (unlike up-front license payments).
- The paper also downplays concerns about weak Windows/PC sales, citing an RBC estimate that Windows now accounts for only ~10% of Microsoft's value. It gives a thumbs-up to Microsoft's Apple-like decision to make Windows 10 (due in 3 days) a free upgrade for Win. 7/8 PCs, and to deliver more frequent updates.
- Microsoft earnings coverage
Microsoft Corp. engages in the provision of developing and marketing software and hardware services. Its products include operating systems for computing devices, servers, phones and intelligent devices. It also offers server applications for distributed computing environments, productivity... More
Industry: Application Software
Country: United States
Other News & PR