Microsoft Growth Is Flat, But Some See 'Value' Stock
The market is rocking this year, the Nasdaq is up 43%, and tech and telecom shares are leading the party.
But during the Nasdaq's scorching run, Microsoft Corp., once the sexiest name in the tech world, has put in a rather prim performance. Despite strong earnings, its shares are up a measly 2% this year. In the past 12 months, shares in the company have eased 2% -- and they are down 12% in the last three months. Microsoft rose 0.53%, or 14 cents, to $26.38 Tuesday.
Microsoft's problems are due to the shifting taste of investors -- and growing skepticism about the company's growth prospects. In the past year or so, beaten-down stocks with better hopes for growth, but limp current earnings, have been in favor, while stocks like Microsoft waddled ahead without gaining much attention.
One reason Microsoft hasn't shown much spunk is that its shares didn't fall as steeply as many other tech stocks. Microsoft shares are down about 56% from their all-time high of $59.97 reached Dec. 30, 1999. But Cisco Systems Inc., another one-time tech darling, has watched its shares plunge 72% from their peak, while Lucent Technologies Inc. is down 95%, even after a sharp rally this year (adjusting for stock splits and spin-offs). While the rest of the industry tanked, Microsoft harvested billions of dollars a year in deferred revenue in 2001 and 2002, posting double-digit revenue growth.
But at the beginning of 2003, Microsoft executives issued warnings and by April they were forecasting flat earnings for the year. "That immediately threw cold water on investors' sentiment," says Rick Sherlund, an analyst at Goldman Sachs who has an "outperform" rating on the stock, which is the firm's best of three rankings.
More recently, shares sold off after the company issued earnings for the quarter ended Sept. 30, despite encouraging words about revenue, earnings and the 2004 outlook. Investors fretted that deferred revenue was shrinking, amid an influx of computer viruses that distracted customers, and a reorganization of the company's sales force.
The company surprised investors in October when it said deferred revenue for the quarter fell $768 million -- well over two times what analysts had forecast -- and a sign that Microsoft is eating down its stash of deferred revenue faster than it is adding to it with new bookings.
Others say that while Microsoft's margins remain juicy -- gross profit of about 85% of revenue -- they have nowhere to go but down as the huge company looks for new businesses. Some of the fastest-growing businesses, such as the X-Box game console, are unprofitable. And growing demand from emerging-market countries won't help the bottom line very much, because so many of these markets truck heavily in pirated software.
Microsoft -- known affectionately as Mister Softie among Wall Street traders -- has done so poorly some people are starting to look at the company as, believe it or not, a value stock. Microsoft shares trade at a multiple of about 26 times earnings of the past 12 months. That is high compared with the historic P/E of the market, of course, but downright cheap compared with other tech stocks. The P/E on the Nasdaq 100 is a heady 64. Microsoft traded with a P/E of 76 in 1999, when it was viewed as the preeminent growth stock.
Microsoft now is cheaper than the overall market, which trades at a P/E ratio of 27, according to Birinyi Associates, a money-management firm. It is all attracting incipient interest from some savvy value investors. The company's dividend, while smallish at 16 cents a share, is another piece that attracts value investors hunting among tech stocks.
Microsoft "is beginning to arrive at the stage where it is worth considering on a contrarian, value basis," says James Gipson of the Clipper Fund, a noted value investor who doesn't yet have a position in the stock.
But continued weak corporate spending on technology could stifle sales of its new products, particularly in cases where older technology is working fine. That challenge is acute in Microsoft's server division, which makes software to manage business functions from large central computers. Because in most cases the server products aren't included in the already booked multiyear licenses, new-server sales mean fresh growth for Microsoft. But server software is easy to postpone at a time of still-tight tech budgets.
The company's legal issues, including an antitrust investigation by the European Union and a longstanding antitrust suit with Sun Microsystems Inc., don't help. On top of that, the company faces a threat from the Linux operating system and other so-called open-source software. Microsoft's server group has grown in recent years by eating into the market share held by Sun Microsystems and other sellers of rival Unix software. But Linux, which is a close cousin to Unix and can be a cheaper alternative to Microsoft's Windows, now is gobbling up that market faster than Windows.
Microsoft has been banging the drum on a product code-named Longhorn, the next major version of its Windows operating system. But it may not make its debut until 2006.
Microsoft shares seem unlikely to catch fire until investors shift their focus back to steady companies with giant cash flows. That could happen next year, some say, if the market has a hiccup.
"I'm a believer that superior cash flow is the place to be in 2004, and there's a compelling case that Microsoft is a play on that," says David Sowerby, a portfolio manager at Loomis Sayles & Co. in Detroit who owns Microsoft shares, though he isn't adding more shares. "But the stock is testing my patience."
Mr. Sherlund of Goldman says Oracle Corp.'s earnings next week could spark a shift that could help Microsoft.
"We'll be looking at Oracle as a possible catalyst to demonstrate that the software business is beginning to show tangible improvement," says Mr. Sherlund. "This could result in a rotation from the semiconductor sector back into software."
The best hope for the stock might be a new upgrade cycle, perhaps sparked in part by the very viruses hurting Microsoft's sales.
"As Microsoft and the antivirus companies drop their support for older versions of Windows, customers may have little choice but to upgrade to Windows XP to protect their systems," says one large hedge-fund manager who shifted out of Microsoft this year but might get back in. "Antivirus could be the Y2K of 2004," spurring sales and sending Microsoft shares higher.
微软展现价值股潜力
美国股市今年大幅震荡，那斯达克综合指数涨了43%，由科技和电信类股领涨。
但那斯达克指数大幅上扬的同时，一度曾是科技股中最受欢迎的微软(Microsoft Corp., MSFT)的表现却毫不起眼。尽管公司收益强劲，但微软股价今年仅上涨2%。过去12个月，该股价格累计下跌2%，并在最近3个月跌了12%。周二收盘，微软涨14美分，至26.38美元，涨幅0.53%。
微软的问题源自投资者的兴趣变化，以及对该公司增长前景的怀疑日益增强。过去1年来，那些当前收益不佳但增长前景较好的受压股票获得投资者青睐，而类似微软这样的个股却举步艰难乏人问津。 微软没有对此大为光火的原因之一是其股价跌幅不像许多其他科技股那样严重。当前微软股价较1999年12月30创下的59.97美元历史高点跌了56%左右。但另一只曾经辉煌的科技股思科系统(Cisco Systems Inc., CSCO, 简称：思科)股价已较其峰值下跌72%，而朗讯科技(Lucent Technologies Inc.)股价即使今年出现大幅反弹后，仍较最高水平跌了95%。虽然其他同行受到重创，但微软在2001和2002年分别获得了每年数十亿美元的递延收入，实现了两位数的收入增幅。
但微软高层管理人员今年年初曾发布收益预警，4月份时他们预计今年收益与上年持平。高盛(Goldman Sachs)分析师里克?谢兰德(Rick Sherlund)说，这不啻于泼冷水，立刻挫伤了投资者人气。他将该股评级定为强于大盘，这是微软得到的三个评级中最好的一个。
当微软发布截至9月30日的财政季度收益后，该股又遭遇新一轮抛售，尽管该公司同时发布了对收入、收益及2004年前景的乐观预期。投资者的烦恼在于微软销售力量重组，以及电脑病毒频繁爆发造成客户流失，使得该公司递延收入逐渐减少。
该公司10月份称，当季递延收入减少7.68亿美元，这令投资者大吃一惊，因为此降幅是分析师预期的两倍多，而且表明微软消耗递延收入的速度快于其通过新订单补充该收入的速度。 其他人认为，虽然微软的利润率依然可观（毛利率达85%），但随著这家规模庞大的公司寻找新的商机，其利润率将只会下降。包括X-Box游戏机在内的一些发展最快的业务是不盈利的。而来自新兴市场的持续增长的需求也不会对微软的收益有所帮助，因为许多此类市场的盗版现象太猖獗。
被华尔街交易员昵称为"软弱先生"(Mister Softie)的微软表现如此之糟糕，以致于一些人开始将其股票视为价值型股票。微软股价相当于其过去1年每股收益的26倍左右。这相对于市场本益比历史水平来说可算高的，但却明显低于其他科技股。那斯达克100指数成份股的本益比高居于64倍。1999年微软的本益比为76倍，当时该股被视为一只出类拔萃的成长型股票。
据资金管理公司Birinyi Associates的数据，当前微软的本益比为27倍，低于大盘。这对于一些理智的价值投资者比较有吸引力。该公司16美分的每股派息额也是价值投资者在众多科技类股中选中该股的原因。
Clipper Fund的詹姆斯?吉普森(James Gipson)称，微软开始成为值得考虑价值投资的选择。他就是一名价值型投资者，但尚未持有微软的股票。
但是，科技企业支出的持续疲软可能抑制微软新产品的销售，特别是在原有的技术仍能很好发挥效用的领域。这种挑战在微软的伺服器部门表现得十分严峻，该部门为那些大型中央电脑生产商业功能管理软件。由于在大部分情况下，伺服器产品不包括在已经预定数年的授权合同中，因此新的伺服器销售对于微软公司来说意味著新的增长机会。但是同时各科技公司的伺服器软件支出计划也很容易在预算紧张时被搁置。
微软公司涉足的一些诉讼也未能给公司带来帮助，这些诉讼包括欧盟反垄断调查和同Sun电子计算机公司(Sun Microsystems Inc., SUNW, 又名：升阳微电脑)长期的反垄断诉讼。最重要的是，公司面临来自Linux操作系统和其他所谓的开放软件的威胁。微软的伺服器部门在最近几年通过抢占Sun电子计算机公司和其他Unix软件销售商的市场占有率，自身获得了发展壮大。但是Linux接近Unix，可以成为微软的视窗系统的替代产品，现在正在以比视窗系统更快的速度抢占市场。
微软一直以来致力于代码为Longhorn的新产品的开发，该产品是视窗操作系统的下一个重要版本。但是该产品在2006年之前不太可能上市。
在投资者把注意力转移到拥有大量现金流的稳定发展的公司之前，微软的股票看起来不可能受到普遍追捧。一些市场人士认为这种情况可能在明年出现。
Loomis Sayles & Co.驻底特律的投资组合经理戴维?索尔比(David Sowerby)表示，相信2004年市场将重视公司现金流的情况，引人注目的是微软公司正是这样的公司。索尔比持有微软的股票，但尚未增加持股。
根据资金管理公司Birinyi Associates的数据，当前微软的本益比为27倍，低于大盘。这对于一些理智的价值投资者比较有吸引力。该公司16美分的每股派息额也是价值投资者在众多科技类股中选中该股的原因。
Clipper Fund的詹姆斯?吉普森(James Gipson)称，微软开始成为值得考虑价值投资的选择。他就是一名价值型投资者，但尚未持有微软的股票。
但是，科技企业支出的持续疲软可能抑制微软新产品的销售，特别是在原有的技术仍能很好发挥效用的领域。这种挑战在微软的伺服器部门表现得十分严峻，该部门为那些大型中央电脑生产商业功能管理软件。由于在大部分情况下，伺服器产品不包括在已经预定数年的授权合同中，因此新的伺服器销售对于微软来说意味著新的增长机会。但是，在科技预算仍然紧张的时期，伺服器软件的支出很容易被搁置。 微软公司遭致的一些诉讼对公司毫无裨益，这些诉讼包括欧盟反垄断调查和同Sun电子计算机公司(Sun Microsystems Inc., SUNW, 又名：升阳微电脑)长期的反垄断诉讼。另外，公司面临来自Linux操作系统和其他所谓开放软件的威胁。最近几年，微软的伺服器部门通过抢占Sun电子计算机公司和其他Unix软件销售商的市场占有率，获得了发展壮大。但是Linux现在正以比视窗系统更快的速度抢占市场。
微软一直以来致力于代码为Longhorn的新产品的开发，该产品是视窗操作系统的下一个重要版本。但是该产品在2006年之前不太可能上市。
在投资者把注意力转回到拥有大量现金流的稳健型公司之前，微软的股票似乎不可能受到普遍追捧。一些市场人士认为，如果市场短暂下跌，这种情况可能在明年出现。
Loomis Sayles & Co.驻底特律的投资组合经理戴维?索尔比(David Sowerby)表示相信，2004年公司现金流状况将获得市场关注，微软正是这样的公司。索尔比持有微软的股票，但尚未增加持股。
高盛的谢兰德表示，甲骨文公司(Oracle Corp.)下周公布的收益也许有益于微软的股价。
