Last Friday, Microsoft (NASDAQ:MSFT) ended at $32, marking a 1.9%
gain for the week. (The company's stock is currently up 23% this year.)
While there have been concerns that a slowdown in the European economy
would hit both corporate and consumer tech spending, the software giant
has produced consistently good returns for its stockholders.
Last week, Microsoft gave a preview of Windows 8, its new operating
system, at the World Mobile Congress in Barcelona. (Windows 8 is
scheduled to be launched later this year.) Analysts note that the
company has been trying to maintain revenue from a waning PC market,
while also establishing a stronger presence in the fast-growing sector
of mobile devices. The latter has so far been dominated by Apple's
iPhone and iPad, and Google's Android software. Garner Inc. analyst
David Cearley said, "Microsoft's future path is riding on Windows 8 and
its success. This is a chance for Microsoft to re-establish itself in a
market where it's becoming increasingly irrelevant. Microsoft is late to
the game and this is a different game than they have been playing. But
if they hit a home run with Windows 8, it could still turn some things
around."
For now, Microsoft is riding on the general optimism over Windows 8.
The company's stock has recently been trading at its highest levels
since April 2008. It has also been observed that Microsoft's financial
performance traditionally improves when it releases a new version of
Windows, and the last upgrade was in October 2009 when Windows 7 was
introduced. Nomura Securities analyst Rick Sherlund rated the company as
a "buy", while giving it a $37 price target. Sherlund wrote, "The
period between beta release and release to Manufacturing (we estimate
end of July or August) of a major new version of Windows has tended to
be the richest sweet spot in the product cycle, driving the stock 21%
higher, on average."
From the preview, Windows 8 appears to be very different from its
predecessors. Moreover, its versatility will enable it to run both PCs
and tablets. Sanford Bernstein analyst Mark Moerdler rated Microsoft as
"outperform" with a $37 price target, saying that Windows 8 "delivers
superb user experience, is competitive against iOS and Android, and
makes Apple iOS and Android look old-fashioned."