Microsoft Corp (MSFT)

A software executive that had been with them for 23 years suddenly left the company and this was a surprise and viewed as a negative because he was seen as eventually taking over as CEO, so there is definitely change going on. Windows 8 has not done much and was disappointing. Their tablet was launched and was met with modest demand, but they have a supply issue. Lots of cash and trading at single digit multiples. They are trying to reinvent themselves and are going into hardware, which may not work. Market doesn’t like uncertainty.

(Market Call Minute.) Not so sure about Windows 8. Has gotten some pretty mixed reviews. Prefers others.

He is warmish, but not hot on this company. Likes the prospects for their operating systems because the previous one was so bad that a lot of people will be upgrading just to escape. The negative is that PC usage in general is not growing anymore and is declining. A lot of people are using tablets.

For the 1^st time in a long time they have a product that is very well reviewed and hopefully will have some excitement in the market. Windows 8 is refreshed and replacing Windows 7 so he thinks this will drive the upgrade cycle by a lot of PC users. They have momentum and whether or not they can sustain it depends on how well they execute. He is closely watching this one but would like it in the with $25-$26 range.

(A Top Pick Oct 6/11. Up 10.06%.) Doesn’t feel they are competing with others as much as having Windows 8 and their Surface Tablet consolidate their position in the enterprise space. Accumulative, all those things together will be good for this company. Thinks that they will continue to do well and will give you 10%-15% annual return. Still a Buy.

Windows 8 is coming out Friday and they also have the Surface Tablet which is getting mixed reviews. Doesn’t think the tablet is going to change anything but Windows 8 could. The difficulty is that they have pent-up opportunity and demand for Windows 8 but on the other side PC growth has fallen off a cliff, and desktop growth is not doing that great. It’s just not getting any traction.

(Market Call Minute.) Recently sold his holdings on concerns of the move from PCs to tablets is having a more significant impact on their business.

Good balance sheet and it straddles PC market, tablets, networking, video games, etc. valuation is extremely cheap. By the end of next year, he thinks it will have over $7 net in cash. It will have record earnings next year. Trading at 7.5X earnings. Wonderful dividend.

Intrigued. Between surface tablet and Windows 8 and the huge marketing campaign, also the retail stores, there are really interesting things going on there. He would be okay to hold it. Just corrected 10%. Take a look at it.

Likes this one a lot. 3% dividend. He has a model price of $44.60 giving a 48% positive differential. Thinks the stock price grows with the balance sheet.

(Market Call Minute.) Not his favourite tech stock but it is difficult to argue with the valuations.

(Market Call Minute.) Not his favourite play in technology. Hard to ignore the valuations. Clearly growth is slowing down. Losing market share but at 10X earnings and the dividend yield there is really no need to sell it.

This has had 12 years of consolidation and is just starting to break out. Clear sailing. This is a leader.

(A Top Pick Sept 2/11. Up 23.16%.) Windows 8 is coming out, which could take some training for people to get used to and it could be an obstacle. Doesn’t think you would see the flow through on the uptick in the revenue that you saw on other things but it’s a much better product. Have a lot of products coming out.

Price action has been a lot better recently. We are going to see what they are going to do on the tablet side and the mobile side. Since the expectations on this are so neutral in the US, the stock itself is cheap. They have tons of cash. Apple (AAPL-Q) has stolen the spotlight and has been driving the things like the Q’s, the Spider technology index. Stepping into Microsoft is probably not a bad idea.