Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Where's Microsoft Going?

Tickers in this article: AAPL CRM GOOG MSFT ORCL
NEW YORK (TheStreet) -- There's an uproar on the Street about Microsoft's "disappointing" fourth-quarter earnings results. But disappointing for whom?

I've heard the words "surprise" and "shocker" used to describe the company's miss on earnings per share and revenue. But was it really such a bombshell?

The last time we talked about the state of Microsoft, and in particular the company's management, I said the following:

Say what you want about the word "conviction" in the world of investing, but patience has its limits. Cheering on a company is all well and good. But if it's not matched by execution, there's a point when it's best to cut your losses and move on. With shares of Microsoft having already gained 25% on the year, now's the perfect time to move on to the next good idea. It's all downhill from here.

I said this while the stock was making new 52-week highs in what seemed like every other week. I was not impressed -- not as long as Microsoft was still being led by the current management team, which has shown an inability to find the hidden value this company still has. How it still deserves the benefit of the doubt remains a mystery.

While Microsoft's fourth-quarter earnings results do show the company still has some say in how corporate IT functions, there were still plenty of missed opportunities as the company tries to compete with Apple and Google in mobile devices. With management's poor track record of execution, I don't believe the recently announced "reorganization plan" will be enough to reward shareholders for their patience.

Before you disagree, let's dissect this recent performance.

I think we can agree that not much was expected from Microsoft going into this quarter. We know that a significant portion of the company's revenue and profits come from a declining PC industry. This means that two of Microsoft's dominant franchises -- namely Windows and Office -- are "endangered."

What this also means is the Street had lowered expectations ahead of the report, not just for Windows and Office, which are Microsoft's two main revenue generators. But expectations had come down for several other segments like Server & Tools, Online Services, Entertainment & Devices, etc.

Unfortunately, Microsoft missed its targets on every segment. This is not something investors see every day within the tech industry. Microsoft supporters insist on arguing the details of "by how much did the company miss," suggesting that relative to expectations, the results weren't that bad. But I would caution about this chronic choosing of the "glass-half-full" view. It's blurred.