Microsoft’s (MSFT) stock has gone nowhere for over a decade, trading in the $40-$60 range through 1999 and early 2000, and only occasionally breaking $30 since. Currently trading around $26-$27 ($27.12 on September 16 market close), it’s threatening to pierce $30 again. Several factors support the argument that Microsoft’s stock can achieve sustained value above $30 in the coming year.
Some context can help here. CEO Steve Ballmer has headed the company since January 2000. Stepping into the founder’s shoes is never easy, and no one can blame Ballmer for failing to continue Microsoft’s meteoric growth from a start up to a multinational powerhouse – a company can only grow so big. But at some point blame for failure to generate value for shareholders is placed on the person at the helm, and that’s Ballmer. Consequently, grumbling about Ballmer has been on the rise, with highly respected fund manager David Einhorn saying it’s time for Ballmer to leave and that he’s a drag on the stock (see, e.g., here.).
Setting Microsoft’s anemic stock performance and the sky-high expectations for big tech companies aside, Microsoft’s financial performance since Ballmer took over hasn’t exactly been a disaster. Since 2002, earnings have only gone down twice, in 2004 and (not surprisingly) 2009, and in both 2005 and 2010 they rebounded above the level of the year preceding the declining year.
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