You might think the case for throwing in the towel on Microsoft (symbol MSFT) is all but sealed. The one-time leader of the personal-computer age has struggled to keep up with more-innovative rivals in recent years.
But Windows 8 could change all that. Microsoft’s recent release of the revamped operating system has shown that it has a creative plan for thriving in the new world of mobile and cloud computing. And with the stock still reflecting a highly bearish scenario for the world’s largest software maker, it could be just the right time to get in.
Microsoft is embracing change. In addition to a PC version of Windows 8, the company released compelling adaptations for smartphones and tablet computers. The sleeker operating system should attract more users – both consumer and corporate – to Microsoft-fitted mobile devices. And it means that consumers will be able to more seamlessly run similar apps and sync media among their different devices.
The new operating system could gain a particularly strong following in the tablet market. Although iPads and Android-powered devices are great for reading books, watching movies and surfing the Web, the tablet version of Windows 8 is better suited for work – with Office applications, such as Word and Excel, revamped for a touchscreen format.
Microsoft’s newly introduced Surface tablet has already received strong reviews and a plug from Oprah Winfrey. And in a seeming nod to its resurging competitiveness against Apple, Microsoft has been expanding its brick-and-mortar presence, opening almost 30 retail stores in the past three years.
For investors, though, the stock has been such a dog that it’s hard to imagine Microsoft’s fate ever changing. The Redmond company’s earnings have grown at an annual clip of 9 percent over the past decade. Over the same period, the stock returned a paltry 2 percent annualized, including dividends.
But the stock may finally be so cheap that it can’t get any cheaper. “There’s no question that Microsoft has to transition out of the PC era into something new,” says analyst Michael Turits, of Raymond James. “But what’s not priced into the stock is the possibility that it succeeds.”Elizabeth Ody is a contributing editor to Kiplinger’s Personal Finance magazine. Send your questions and comments to email@example.com. And for more on this and similar money topics, visit www.Kiplinger.com.