This Day On The Street
Continue to site right-arrow
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
TheStreet Open House

Microsoft Knows Where It Is Going, but Who Will Follow?

NEW YORK (TheStreet) -- Microsoft (MSFT - Get Report) shares are up more than 10% since Satya Nadella became CEO in February, but as Microsoft released its new Surface 3 Wednesday one of our most prominent analysts insisted the company is "an embarrassment."

That may prove to be true, but at least Nadella's company knows where it's going. It is recarving for itself a niche among business buyers whose loyalty it once took for granted.

Its first earnings release under the Nadella regime gave it a little breathing room. 

Revenue fell slightly from the year before, and net income fell 6.5%, but the dividend of 28 cents was 5 cents higher than in the previous March. So as fashions among traders changed, from growth to yield, Microsoft was in a sweet spot.

But it's a trick the company may be hard-pressed to repeat, as Nokia's (NOK) device business hits Microsoft's books for the first time this quarter. Nokia's latest numbers look good, but that was because the networks business, which it's keeping, did well.

The devices business, by contrast, is a money pit. So, for that matter, is the Surface business, which has lost an estimated $2 billion so far while generating $2.64 billion in sales, one-third of what the Apple (AAPL) iPad does in a single quarter.

Yet Nadella made clear that he is not for turning with Wednesday's Surface 3 launch. Here is why.

The new tablet-PC hybrid has everything office workers have been demanding from devices. It's thin, light, with a big screen and a real keyboard. It costs $799, plus another $129 for the keyboard. The hope is it will break even, and eliminate the "conflict" that Microsoft sees between laptops and tablets. 

Its best feature may be a "connected standby" mode, which keeps the unit connected to incoming mail and other messages even while powered down. 

The hope is it will free Microsoft users from their current deep attachment to electric cords, as well as the need to wait for the machine to launch.

1 of 2

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
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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!
MSFT $40.97 0.00%
AAPL $123.25 0.00%
FB $83.30 0.00%
GOOG $548.34 0.00%
TSLA $185.00 0.00%


DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs