PC Sales Can Buoy Microsoft Stock
BUZ INVESTORS Reversal About a decade ago, analysts started losing faith in Microsoft Corporation (NASDAQ:(MSFT). Why? Because smartphone sales were crushing PC sales. Since Microsoft’s business was built around personal computers, there was a legitimate fear that MSFT stock would crash and burn…
And, for a while at least, this argument was convincing.
How did it happen? How did investors wrangle triple-digit gains from a stock that was “destined” for the garbage heap of history? That was the question on my mind as I watched this tale unfold.
Here’s what I’ve come up with: Analysts care more about flash than function.
MSFT Stock Hits All-Time High as PC Sales Rebound
According to IDC Research, Inc., first-quarter PC shipments in 2017 increased to 60.3 million. (Source: “Traditional PC Market Was Up Slightly,” IDC Research, Inc., April 11, 2017.)
Not only did this number beat expectations, but it was also a devastating blow to analysts that believed PCs belong in a museum.
It runs counter to their narrative.
They used to wave around declining sales as “proof” that PCs were dead. And, to be sure, there were many years that PC sales did indeed decline.
Microsoft stock has always been an “enterprise” play.
The company lost that identity for a few years (thanks a lot, Steve Ballmer), but re-discovered it when Satya Nadella became CEO. His commitments to cloud computing have single-handedly pushed MSFT stock to new highs.
Nadella knows that selling to businesses, rather than people, can make things a lot simpler. For one thing, companies tend to be more rational and forward-looking than individuals. They also aren’t as fickle.
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Microsoft Corp is engaged in designing, manufacturing, selling devices, and online advertising. Its products include operating systems for computing devices, servers, phones and other devices.
Microsoft is a global provider of software, hardware, and services. Its business is organized into three segments: productivity and business processes (including Microsoft Office and Dynamics), intelligent cloud (including Azure, Windows Server OS, and SQL Server), and more personal computing (including Windows Client, Xbox, Surface, phones, and Bing search advertising). These segments represent 28%, 25%, and 46% of sales, respectively.