Brinker Comment: Microsoft reported earnings on Thursday night and it was a great report! The new version of Windows has really increased the growth rate at the company. The Vista version has really been on a tear. Sales of Windows Vista are up 25%. Net income is up 23%. Revenues are up 27%. Every one of the company's five divisions exceeded goals. Coming up in February, Microsoft will issue updates to its products. If you go back to the early 1990s, Microsoft has been an incredible stock. If you invested $7,000 in Microsoft in 100 shares in the 1990s, that would be worth $252,000 today. How can that be? The stock split so many times that you would now have a quarter of a million dollars. The stock rose 9.5% on Friday alone, bringing the stock up into the mid-$30s. All in all a great report for Microsoft.
EC: Microsoft is one of only two stocks that Bob has maintained a "hold" rating on in his newsletter for many many years. The last stock he recommended was UTEK, and given the fiasco surrounding that stock, I think he is gun shy over picking another individual stock, and I think it is possible that he never will again. As far as Microsoft is concerned, it has underperformed the market until recently, but the earnings report was wonderful. Bob recommended it for purchase many years ago, then switched to a hold, and then in March 2003 recommended it as a buy again, and now it is a hold. He hasn't really talked about it for a long time, but in the wake of this great earnings report, I think he wanted to remind listeners that he still covers it in his newsletter.
EC#2: You may recall that I purchased Microsoft for my newsletter portfolio not all that long ago based on my view that Vista would be an earnings boost. I sold Microsoft for a gain, after my stop loss was executed during the correction process this summer. Should have bought back in, but I am happy about putting some of the cash reserves into the QQQQ shares which are up almost 11% since my purchase, and include shares of Microsoft. In fact, QQQQ constitutes over 5% of that index. The Spiders Select Technology (Ticker: XLK) which I also own in my newsletter portfolio has a ton of Microsoft in it, almost 10% of that exchange traded fund holds Microsoft, so it has benefitted from that company's performance as well. Here is a link to Microsoft's Investor Relations web site where you can download the earnings report listen to the webcast and read the 2007 annual report:
EC#3: Another interesting development in Microsoft is its announcement that it is taking a $240 million equity stake in Facebook's next round of finance at a $15 billion valuation. Microsoft is being given exclusive third-party advertising platform partner to Facebook and will begin to sell advertising for Facebook internationally in addition to the U.S. Read more about it here:
EC#4: Microsoft is also getting a lot of interest from the gamers for its latest video game Halo 3 on the Xbox 360. This game is big big business. Halo 3 sold more than $300 million in sales in the FIRST WEEK ALONE! That makes it the fastest selling video game ever. I may have to purchase that game -- for my kids of course, not me. Really. Learn more about it here:
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