Tech Trends to Watch in 2008

Microsoft shares sell at 15 times 2008 earnings estimates and 17 times 2009 estimates. These are average levels, and investors seem to be discounting near-term upside surprises from this new focus until earnings materialize. While it's true that the online business is less than 5% of sales, remember the company pulls in $5 billion in free cash flow each quarter from its existing businesses. Expect more value creation for MSFT in 2008 and maybe as a new year's resolution you can forgive MSFT for Vista.

3) Tapping into a world of talent. The McKinsey article extends the "factors of production" concept to outsourcing. As much as technology permits companies to decentralize innovation through networks or customers, it also allows them to parcel out more work to specialists, free agents and talent networks.

From an investor's perspective, stocks like the $25 billion market-valued Infosys Technologies (INFY Quote) normally hit the radar as the first name to buy whenever someone mentions outsourcing. But this overlooks the smaller Monster Worldwide, with a $4 billion market value. Quite honestly, with a 26% price decline over the last 12 months, MNST looks like the "Dog of the Dot Nets."

But Monster has a leading position in global online recruiting, solid free cash flow of $200 million per year and a very healthy balance sheet. Factor in the margin improvements from a restructuring and awesome revenue gains in the U.K. recruitment market and this starts to look like a potential winner for 2008. Value investors should take note of this one.