Microsoft latest ER

Today MSFT has released a good quarterly results and it trades up 3% after hour. The release is here: http://www.microsoft.com/presspass/press/2010/oct10/10-28fy11Q1earnings.mspx. People watching it are really having hard time to decide if they want to have microsoft in their portoflio. What is the problem? the future growth. Miscrosoft apparently doesn't want to label itself as a low growth stock which should have given out tons of dividends by now based on its cash level. However, the growth opportunity just doesn't seem so bright unfortunately.

Let's think about what's hot for Microsoft. It has Office, Window 7, Win 7 mobile, Xbox, and Bing. What I really like is its office since it's really powerful and it's also trying online version. As to rest of it, I sort of like win 7 mobile but I have to see what's the consumer's response to it when it is out in November (North america). Microsoft has to face it: it was never a really innovation driven company. Instead it had a good strategy and implementation on copying others' good stuff or buying them. Watch "Pirate in silicon valley" if you don't know what I mean.

Now it's getting too big and the management seems just don't know how to allocate capital anymore. They are late in almost all the revolutions going on such as cloud computing and mobile etc. How can you catch up if you are always two steps behind? Acquisition is the only way, I think. Well, who should it buy? I don't know but I do think cloud computing and mobile security will have good future.

Alright, enough of bashing MSFT. Let's see how it trumps this quarter.

Revenue and EPS both beat as always. Analysts are somehow bullish and I guess tomorrow there will be upgrade showing up. Well the main reason is that the stock were just at a low price level, nothing fundamentally changes.

This is yearly summary for Microsoft. The business is definitely sound. 2009 is bad year just like any other company. 2010 starts the recovery.

what's good about this quarter? Gross margin, profit margin are all good and part of reason is from decreasing SG&A. Efficiency is not the best level but at a good level still. No need to worry about the liquidities since it has tons of cash/short term investment. ROA is pretty good: 6.1% next to the best 8.1% of the quarter in the end of 2009.

So investors should be short term bullish on Microsoft. Again, as I mentioned in other posts, the market is at a high uncertainty stage I would wait after Feds' decision on QE2 and midterm election to build long position. If you consider a long term position on Microsoft, I would say wait to see how people like their mobile platform and how they plan to use their cash.