The Ponderings of Woodrow blogger says he is “bored to tears over the conventional group think” about Microsoft, saying that Paul Graham’s post about Microsoft no longer being feared by others didn’t tell us anything new. Woodrow writes:
“You know what I would like to hear about?
- Microsoft’s phenomenal returns on equity
- The fact that Microsoft is trading at 17x forward earnings, virtually identical the S&P 500 despite having a more attractive overall financial profile
- The strong reviews on the functional improvements in the Office 2007 suite
- The strength of the XBox 360 [which is the real PS3 killer, not the Wii] and the profit leverage that comes in the next few years as the software/hardware ratio skews away from consoles
- The success of BizTalk and SQL server
- The fact that Microsoft is forecast to generate more than $19 BILLION in operating cash flow this fiscal year [by Goldman Sach’s own model]
- That Microsoft has been at the forefront of technology companies in finding ways to return incremental cash flows to shareholders [e.g., huge cash dividend, quarterly dividends, massive buyback]
- The fact that large cap fund managers are underweight Microsoft [hint: you generally don’t outperform by owning the stocks they’re already overweight]
- That Microsoft’s mobile and embedded group will more than double to $575mm+ this fiscal year from 2005 levels
- The launches of Longhorn and Katmai
“If people want to draw a critical eye toward Microsoft, more power to them. I’ve taken the company to task plenty of times. But let’s not praise someone for effectively telling us what an astute observer has known for years. Let’s recognize that despite plenty of challenges and more uncertainty than we shareholders would care for, Microsoft remains the financial envy of virtually every technology firm and has a deeper technical and operational bench than all but a handful of the world’s leading organizations.”
