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2 More Reasons to Dump Microsoft

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Microsoft's (NASDAQ: MSFT  ) chances of shining when it steps up with its latest quarterly report next week continue to diminish.

PC sales had a horrible holiday season. Industry tracker Gartner is reporting a 5% drop in worldwide PC shipments during the final quarter of 2012.

This doesn't come as a surprise anymore. Fellow PC watcher IDC's check last week showed an even larger 6.4% drop in global PC shipments during the same three months.

This is naturally terrible news for Microsoft. The arrival of Windows 8 in late October was supposed to be the catalyst to breathe new life into languishing sales of desktops and laptops. When PC sales were running sluggish earlier in 2012, some apologists theorized that PC makers were simply clearing inventory ahead of the Windows 8 push. Well, it's time for a new theory that centers around Windows no longer being the operating system of choice.

Smartphone and tablet sales continue to climb at the PC industry's expense, tapping Apple's iOS and Google's Android as the new tastemakers of tech. Who needs a clunky PC when the Internet and the computer can fit in your pocket? Sure, there's some heavy-duty computing and gaming that needs Windows, but that's becoming a shrinking portion of the tech-savvy population.

Adding insult to injury, Microsoft's bold bet on mattering in tablets isn't starting to scratch the Surface.

UBS analyst Brent Thill became the latest Wall Street pro to hose down his sales projections for Microsoft's Surface tablet. He now sees Microsoft moving a disappointing 1 million Surface tablets during the holiday quarter, half as much as Thill was originally targeting.

To put things in perspective, Apple sells roughly a million iPads a week! sold "millions" of Kindle Fire tablets during the 2011 holiday season without the ad blitz that Mr. Softy paid up for this time around.

How can the world's largest software company hold up so poorly? The functional shortcomings of the Surface may be corrected in this month's Surface Pro rollout, but the high price points when perfectly capable Kindle Fire and Android gadgets fetch less than $200 will limit its appeal to a niche audience.

Thill is weighing the sluggish Surface sales and shrinking PC presence in shaving his profit target. He now sees Microsoft reporting quarterly earnings of $0.76 a share, in line with the year-over-year decline that analysts are now forecasting.

As long as Microsoft has money, it will never be short of chances or potential catalysts. Mr. Softy isn't going away. However, seeing the stock trading at pocket change away from yet another 52-week low, it's also easy to argue that Mr. Softy isn't going anywhere else either.

2013 and beyond
It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

Read/Post Comments (5) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 15, 2013, at 8:17 PM, Solov wrote:

    What a waste of internet traffic... Who approved an article that beats same dead horse again?

  • Report this Comment On January 15, 2013, at 9:19 PM, DAG_Investments wrote:

    You're right, Solov, but it's way too optimistic to think that anyone actually approves this drivel. I always wonder how many of the geniuses who spew this garbage ever stop to consider whether they wrote it on a smartphone and what that simple question says about their entire opinion.

  • Report this Comment On January 15, 2013, at 11:19 PM, techy46 wrote:

    PC Plus is going to prove PC's Mobile and we already know by Apple's P/S that Steve's dead.

  • Report this Comment On January 16, 2013, at 5:20 AM, thachbui wrote:

    I always earn some money when I see this article. Last time is Nok, I just find the opportunity to buy more share. Now it is Msft, buy some share my friend. It is up 20% in just few day.!!!

  • Report this Comment On January 16, 2013, at 9:48 PM, chilero wrote:

    I hope that MSFT can pull a rabbit of the hat.

    iOS is old and stale. Static icons from 1995 for the win! Isn't it based on some platform from 30 years ago? Apple needs to revamp this platform before everyone, not just teens, start seeing it 'old'.

    Android actually hurts my eyes and as I was picking up an Android phone at my local store the crappy plastic cover almost cut me. It also felt horrible just holding it. Believe it or not a phone should actually feel good in your hand.

    I find W8 and WP8 amazing. Well designed and easy to use. Build quality of the Surface and the Lumia 920 are also far superior to any iPhone, iPad or Android which require giant protective cases. They are too fragile, almost designed to break.

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