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
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 and MarketWatch First Take:
Microsoft shows there is still life in PCs .
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
