WSJ
April 20, 2012, 4:17 p.m. EDT
Microsoft shares return from elephant’s graveyard
Commentary: Bodes well for other tech stocks
By _David Callaway_ (mailto:[email protected])
LOS ANGELES (MarketWatch) —
Yahoo and AOL, take note. Sometimes there are second chances in the tech
world.
The stunning run in Microsoft Corp. shares this year — up more than 25%
year-to-date and almost 5% on Friday after an upbeat earnings report — shows
that investors can still get excited when the big tech elephants roar.
Microsoft had been mired in the elephant’s graveyard of tech stocks for much
of
the past decade, basically keeping pace with a sector still hung over from
the Internet bubble of the late 1990s while Apple Inc. and Google Inc.
stole all the sunshine.
But younger investors may not remember that Apple itself is a turnaround
story. And while Microsoft CEO Steve Ballmer may not enjoy the messiah-like
reputation that the late Steve Jobs commanded, he knows a thing or two about
running a global tech company.
After Jobs cockily assured the crowd at the All Things D conference in
Southern California a few years ago that the introduction of the iPad and
tablet technology meant the personal computer was dead, Ballmer issued a bold
and mostly-dismissed rebuttal the next day. Arguing in part that tablets were
still PCs, just in another form, he cautioned tech enthusiasts against
what they always do — herd toward the latest technology as if nothing else
would survive.
Microsoft’s earnings on Thursday, while not great, underscored his
argument.
_Read MarketWatch’s Microsoft earnings story _
(http://www.marketwatch.com/story/microsoft-beats-targets-with-sales-gain-2012-04-19)
and _MarketWatch
First Take: Microsoft shows there is still life in PCs _
(http://www.marketwatch.com/story/microsoft-shows-there-is-still-life-in-pcs-2012-04-19)
.
Many analysts have cited expectations for several new product offerings
later this year, including a Windows 8 rollout that is supposed to include
technology for smartphones and tablets, as the principal driver of the stock
this year.
But the action on Friday was also in response to something unexpected in
the earnings — a surge in sales of the company’s existing Windows 7 software
for PCs. Seems the old PC market isn’t so dead after all, which bodes well
not only for other PC makers like Hewlett-Packard Co. and Dell Computer
Inc. , but for the corporate economy in general.
This in itself is a big deal for tech investors. Microsoft shares are still
not above their 2007 peak before the financial crisis.
And folks may be overly-optimistic about what Windows 8 will accomplish on
smartphones and tablets. But if a rise in sales of software for the
still-huge PC market could be a harbinger for what could be a much longer
cycle of
corporate and consumer tech spending that could see the Nasdaq and the
Dow Jones Industrial Average push much higher from their already
optimistic levels. And Europe be damned.
What this means from the other former tech darlings who have lagged over
the past few years, Cisco Systems , Intel, Yahoo, and AOL remains to be seen.
But at least it shows their managements that indeed hard work and smart
strategies can sometimes turn things around. It doesn’t have to be all
Facebook and Zynga and LinkedIn.
The mood of the tech consumer changes with the breeze. It’s easy to forget
the old stalwarts who still account for most of the spending on tech
components and equipment as we look for more and more creative new apps to
cook
our meals and do our homework. But Microsoft’s surge is a feel-good story
not just for embattled tech executives, but for the tech economy as a whole
--
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