Why Microsoft Is Heading to $40
NEW YORK ( TheStreet) -- Lately, I have begun to wonder if software giant Microsoft(MSFT) is still a technology company -- not because it no longer deserves the distinction, but because the market doesn't always regarded the company in the manner that it does Apple(AAPL) or Amazon(AMZN) .
It is no secret that part of the reason has to do with the fact that not only has Microsoft traded relatively flat over the past decade, but it's a foregone conclusion that Wall Street does not care much for the company's management -- one that has done little to inspire confidence and produce the rate of growth that investors crave. Fairly or unfairly, Microsoft is more often regarded for what it isn't instead of being credited for what it is. But I have reason to think that all of this is about to change.
The Quarter That Was
On Thursday, the company demonstrated during its third-quarter earnings results just how committed it is to turning around its fortunes and, more importantly, turning around how it is perceived in that ever-pessimistic court of public opinion known as Wall Street.
To that end, I can only say that it started its opening argument in convincing fashion by having earned 60 cents per share -- topping analysts' estimates by 3 cents on sales of $17.4 billion. The company continues to benefit from a resurgence in its Office productivity applications, server software, teleconferencing units and of course its operating systems franchise.
It is no secret that its periodic OS releases for years have been the primary driver of the stock -- and this year will be no different as the highly anticipated release of Windows 8 is due to provide a considerable pop to the stock. This is not only going to benefit Microsoft, but is also expected to raise the fortunes of its struggling PC partners in Hewlett-Packard(HPQ) and Dell(DELL) . But what investors will look for is whether or not Windows 8 will be enough to bring Microsoft back in favor with consumers. The company reported Windows division sales of $4.62 billion -- representing an increase of 4% from the period of a year ago.
What was interesting was that Microsoft attributed the increase in sales to surging enterprise demand for its Windows 7 software. Remarkably, its increase in Windows sales was greater than the overall increase in PC shipments. This suggest to me that perhaps the PC market is not as bad as once perceived and that just maybe it is possible that Microsoft can possibly benefit from a successful launch to narrow the gap between itself and the tech behemoth that is Apple.