Microsoft: Still a Day Late, but No Longer a Dollar Short

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Steve Ballmer has never had a problem letting us see him sweat. On Wednesday, he had no reason to. For as troubling as new technology demos can be, Microsoft (Nasdaq: MSFT  ) pulled off several during Ballmer's relatively uneventful opening keynote to kick off this week's Consumer Electronics Show in Las Vegas.

Rather than just skiing through the moguls -- from mishap to mishap -- Mr. Softy demonstrated products that weren't just the same old point upgrades. Consider the Xbox: On stage, a Microsoft product manager showed off a voice-activated interface that danced between music and movies with little effort.

Microsoft's Windows Phone 7 also looked good. We don't know anyone making odds on the success of the Windows Phone here in Vegas, but we'd guess they'd be fairly long. Yet from what we could see, it was a well-designed, attractive, and even fun-looking device that contrasts nicely with competitive offerings from Apple (Nasdaq: AAPL  ) , Motorola Mobility (NYSE: MMIWI  ) , and Research In Motion (Nasdaq: RIMM  ) .

So should investors get excited about Microsoft again? Does it matter that you're no longer a dollar short when you're still a day late?

Sure, sometimes being late isn't as bad as it seems. For example, Microsoft has sold more than 8 million Kinect controllers in its first 60 days on the market. When it came time to chase Nintendo and its Wii motion controller, Sony (NYSE: SNE  ) largely chose to replicate what came before. It took Microsoft to think really differently about the way we interact with a console.

But perhaps nothing accentuates a change in the company's traditional thinking more than a newfound willingness to part ways with its traditional Wintel alliance and design a version of Windows for ARM Holdings' (Nasdaq: ARMH  ) low-power architecture. We don't know what netbooks and tablets will rise from this pairing, but it's safe to assume Google (Nasdaq: GOOG  ) is already looking over its shoulder.

Why this won't stay in Vegas
There's much to like about Microsoft's product direction with each of the products it showed at CES. But will any of these feel-good stories change the way investors see the company? Here's our take:

Windows Phone 7. Will it move the needle? Not really. For those who really want a Windows phone, Microsoft has given them a lot more to love. For those on the fence, the handset is an attractive choice, but it's hardly a no-brainer alternative to either the iPhone or any of the many Android winners currently on the market.

Xbox, Xbox Live, and Kinect. Will they move the needle? Yes. The fight for the figurative "remote" in the entertainment center of America's living rooms is messy and by no means over. What Microsoft showed us is among the best interactive TV offerings we saw.

Windows 8, Sandy Bridge, and ARM. Will they move the needle? A little. It's far too early to say Microsoft has put a shot across Apple's or anyone else's bow (pardon the metaphor; we were staying at Treasure Island), but these systems are clearly fast and functional, and the two-screen Acer Iconia laptop that Ballmer and his team demonstrated was as slick as anything we've ever seen in an Apple demo.

The Foolish bottom line
Microsoft already has a lot of fans among value investors, and for those who already like the company's market dominance, healthy cash position, and reasonable valuation, this week's CES announcements may have given you more reason to get excited.

For growth investors, there still isn't much to love here. But the story is about as good as it's been in a decade. And that's saying something.

Now it's your turn to weigh in. What do you think of Microsoft's CES announcements? Would you buy the stock at current prices? Use the comments box below to let us know what you think.

What will be the big trends of the next five years? We asked our top equity analysts that question, and they came back with five stocks we've put real money behind. We profile all five picks in a new special report. Get instant access by clicking here -- it's free.

Interested in more info on the stocks mentioned in this story? Add Microsoft, Apple, Research In Motion, Motorola Mobility, Nintendo, Sony, ARM Holdings, or Google to your watchlist.

Google and Microsoft are Motley Fool Inside Value picks. Apple and Nintendo are Motley Fool Stock Advisor selections. Google is a Motley Fool Rule Breakers recommendation. Motley Fool Options has recommended that subscribers open a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days.

Fool contributors Tim Beyers and Karl Thiel are members of the Motley Fool Rule Breakers stock-picking team. Karl owns shares of Apple. Tim had stock and options positions in Apple and a stock position in Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Apple, Google, and Microsoft. The Fool is also on Twitter as @TheMotleyFool. Its disclosure policy isn't voice-activated, but it's far from unspoken.

Read/Post Comments (8) | Recommend This Article (8)

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 08, 2011, at 1:24 PM, AlyByrd wrote:

    I sold Apple WAY too early, and I was misled by my advisor at the time of Googles IPO, and even after liquidating my accounts to get in on the action, and missed that boat entirely. Flash forward to the present, and when I had some funds to move into an investment about a year ago, Microsoft was a no-brainer. The odds of it reaching the gargantuan heights of APPL or GOOG are slim to none- but then who ever will....? MSFT is an incredible value right now, and cloud or no cloud MSFT is not going away anytime soon, and will continue with its slow and steady rise upward.

  • Report this Comment On January 08, 2011, at 5:20 PM, DefunctAcct wrote:


    I would prefer a UN*X based OS in my server. So I would prefer Mac OS/X running on Mac hardware rather than Windows 8.

    Barring that, I will just run UN*X on Macs.

    Yes, hardware are becoming more powerful but software needs to catch up. What Windows 8 will be underneath is not clear but what Mac OS/X Lion will be is quite clear after looking at Snow Leopard.

    Other that that, I mostly agree with your point that people who overly focus on mobile devices are missing the coming wave of changes to desktop computing. It is a new world dawning.

  • Report this Comment On January 08, 2011, at 6:18 PM, SimchaStein wrote:

    MSFT is still a dollar short. OK, 50 cents short. Maybe they can resume growth. But how? Maybe with Kinect. The challenge when you're big, with high margin products, is you need something major "move the needle".

    as for infothathelp, "Apple/Microsoft/Intel will wipe out all forms of competition in all other things", have you heard of ARM, Android, Linux, FaceBook, and Google, to name a few.

  • Report this Comment On January 08, 2011, at 10:45 PM, Henry3Dogg wrote:

    "Sony (NYSE: SNE) largely chose to replicate what came before. It took Microsoft to think really differently about the way we interact with a console."

    Oops. I think you just admitted that you consider yourself to be part of Microsoft. Which rather invalidates your opinion.

    Or maybe your just pasting from MS press releases. Which still invalidates your opinion.


  • Report this Comment On January 09, 2011, at 10:18 AM, Klippenstein wrote:

    As investments, technology companies are very hard to assess with any certainity. How could Dell (or Cisco for that matter) have earnings for decades, never pay a dividend and have no real growth in shareholder equity (i.e., networth)? Apple has also never paid a dividend ... never returned anything to shareholders. What scares me about Apple is that, the company could disappear tomorrow and the world of information technology would continue much as it was ... a few people would be annoyed they had to now run Google on their phones or use Windows PCs, but beyond that nothing would change. Removed Microsott and its technology and the digitial world as we know it would crash to the ground. It would take a long time to get us up and running again (and might make the financial meltdown of 2008/9 seem like childs play. We NEED microsoft today and for the forseeable future. We don't need Apple (or Google for that matter). Equivalents would be found very quickly.

  • Report this Comment On January 09, 2011, at 1:51 PM, etgh wrote:

    Microsoft was never an innovator and in fact was notorious for copying (stealing ?) other people's products. I don't think I need to provide the long list but Netscape is one of the more glaring examples.

    With Apple's resurgence, MS have become a sort of dusty "old school" company with not much to offer other than a PC OS and a reasonable gaming system. Hardly the stuff of dreams.....

    I'm expecting any day that Steve B. will be ousted and new fresh set of folks will be brought in and MS will go through a regeneration of their own in a couple of years.

    At a perennial $26 stock price, investors are probably quite fed up the the status quo.

  • Report this Comment On January 09, 2011, at 6:26 PM, techy46 wrote:

    The debate over complex instruction set computers (CICS) such as Intel and reduced instruction set computers (RISC) such as ARM has occurred several times over the last 30 years. CICS usually wins in general computing and RISC can compete on economics in specialized computing (Cameras, Phones, etc.). However, Intel’s real advantage is that the enterprise market for servers, desktops and laptops (CICS) uses about $50b worth of processor chips per year priced at $100-1000 per chip while the mobile market for phones and tablets (RISC) uses about $15b worth of processor chips per year priced at $10-30 per chipset. Intel’s most economical Atom is about $30 per chipset while Qualcomm’s Snapdragon is about $16 per chipset. Intel’s next Atom will scale down to $15 or lower per chipset aimed squarely at Qualcomm. Intel will release the lower priced chipsets when it doesn’t adversely effect their overall revenue mix from their more expensive chipsets. Qualcomm will be in a difficult position with only dual or quad core RIS chips when Intel lowers their prices to $10 or below thus lowering Qualcomm’s revenue while increasing Intel’s. It’s all about the best gross revenue, Intel $40b vs QCOM $10b, and margins and that’s what Intel invented in the processor semiconductor industry.

  • Report this Comment On June 06, 2013, at 12:44 AM, Bigcurt1963 wrote:

    The Touchscreen PC is starting to come on the market. Looks like Windows it is ready for that market.

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