Microsoft Just Killed Itself, Apple Wins Again

Summary

  • Tim Cook has just been given one of the best gifts as CEO.
  • A year from now, investors may wonder, "what in the heck was Nadella thinking?" And so will Ballmer.
  • Microsoft's "generosity" to Apple might be a double-edged sword.

With Microsoft (NASDAQ:MSFT) stock trading at near 52-week highs, no one is using the term "Mr. Softy" anymore to describe the company's performance. It's true that Microsoft is no longer the playground bully that it was in the late 1990s. But the company is far from the pushover it resembled under Steve Ballmer. That said, although the stock is trading much better these days, Microsoft is not back to full strength. And we worry that investors are getting ahead of themselves.

The stock has been boosted by (surprisingly) Apple (NASDAQ:AAPL). The word is that Microsoft new CEO Satya Nadella plans to make Microsoft Office available to Apple's iPad next week. We see this as a good move, especially since former CEO Steve Ballmer was adamantly against the idea. The notion of putting Microsoft's enterprise software on an iPad made Ballmer cringe. But analysts are applauding Nadella's decision.

On the rumor of next week's launch, Ross MacMillan of Jefferies raised his earnings estimates and price target for Microsoft. While keeping his "buy" rating on shares, MacMillan raised his price target to $47 from $42. MacMillan believes that moving Office to the world's best-selling tablet could be bigger than originally estimated. In his research note, MacMillan said:

"Our updated analysis suggests that O365 could be a bigger driver than we previously assumed," MacMillan wrote in the note. "We now think native Office for iPad (available through an O365 subscription) could drive $2-4 incremental value per share predominantly from the consumer market."

The risk here is that Microsoft's "generosity" to Apple might be a double-edged sword. There's no question opening Office 356 to Apple's iPads will boost Microsoft's bottom line. But Apple's lack of enterprise applications for the iPad has been one of the company's main weaknesses. The other factor is, Apple has made it known that it is "not

This article was written by

Saintvilus is the founder and CEO of WallStPlaybook.com. After 20 successful years in the IT industry, Saintvilus decided his second act would be as a stock analyst -- bringing logic from an investor's point of view. Richard's work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets.Follow @Richard_WSPB

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