This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

TechWeek: The Trouble With Being Microsoft

Other analysts, including Mike Marzolf, a portfolio manager with Thrivent Financial, were bothered because Microsoft dropped a $2 billion spending bombshell and didn't specify where the money would go.

But that question was largely answered this week, when CEO Steve Ballmer unveiled adCenter , the company's new Internet search advertising service, and said Microsoft will increase R&D spending for MSN by 57% to $1.1 billion and increase capital spending for the Web portal to $500 million from $300 million this year.

That's plenty of cash, but remember: Ads related to Internet searches pulled in some $5 billion in revenue last year. And Google (GOOG), of course, is a formidable competitor, with a very long lead over Microsoft, which leads investors to ask if Microsoft can defeat Eric Schmidt & Co.

But that's the wrong question to ask. The right question is this: "Can Microsoft make money competing with Google and Yahoo! (YHOO)?

The answer remains to be seen, but Goldman Sachs analyst Rick Sherlund framed the question well in a recent note. "To be big it may not be necessary to beat Google. Perhaps the view is that Microsoft will be broader in directing ads than Google or Yahoo! by leveraging a broader array of services including video games with Xbox directed advertising, mobile, small business hosted services (Office Live), and third-party generated content built with Microsoft's tools."

Fair enough. But investors are running out of patience with the company, and it had better show some results -- or at least convince investors that good results are coming before too long.

"I'm going to give Microsoft a few more quarters," says Daniel Morgan, portfolio manager for Synovus Investment Advisors. Asked why he can't a bit more patient, Morgan spoke for many hard-pressed managers, saying: "I'm judged on my results and I've been in this stock for a long time."

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
MSFT $41.62 0.00%
AAPL $124.75 0.00%
FB $80.78 0.00%
GOOG $524.05 0.00%
TSLA $206.79 0.00%

Markets

DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs