Microsoft Corporation (NASDAQ: MSFT) is a dinosaur among tech companies but is Microsoft a good investment? As in any stock, people have different opinions, I myself do not own Microsoft and I will explain why. Microsoft may well give a good return, but their future looks uncertain in my eyes. The share consolidated and moved sideways between 2010-2013, however, the stock have since then risen amazing 80%. Microsoft's stock may not perform poorly in the future, but there are better high-growth stocks to buy. I will go through their business and tell you why you shouldn't buy Microsoft.
Microsoft is making everything too complicated.
The company has changed from a software company to becoming a cloud-based business with an ecosystem that sells devices and services. First as you know, they sold its operating system, Windows and productivity software, Microsoft Office. Now they are constantly increasing its hardware business to reduce its reliance on the PC (sales of PCs decreases each year). We saw the acquisition of Nokia's smartphone and tablet business by Microsoft (they were bought for $7.2 billion in September, 2013). Nokia was basically the only company that really used Windows Phones platform. The year before, Microsoft also released a tablet computer, called Surface. We clearly see that Microsoft with its software and hardware are building up an ecosystem. They have also other products like Xbox and Skype in their cloud segments. These products have been successful but there is heavy competition in the cloud space with a variety of companies such as; IBM (NYSE: IBM), Amazon (NASDAQ: AMZN), Oracle (NYSE: ORCL) and Google (NASDAQ: GOOG). However, their ecosystem is continuing to be strengthened. Now on Monday (January 26th) will they announce its Q2 FY 2015 earning, hardware and cloud sales is in focus. Microsoft's revenue is a bit over $90 billion annually and Windows is still their largest business, making up over 24% of its total value.
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A few days ago, Microsoft unveiled Windows 10, which is a free update for some users (if you have Windows 7 or Windows 8.1) but it is only free for the first year. They also released a new web browser only for Windows 10 called Spartan. Microsoft is making everything too complicated. They release many different versions of their software products, therefore, are the customers using different versions which can make it confusing and the integration gets worse. Each new version of Windows is like a spin on the lottery. First they released Windows XP, which was a success (despite all the bugs and security problems), but Windows Vista was a total flop. Then did Windows 7 regained the consumers confidence while Windows 8 was mocked. Now with Windows 10 is the start menu back and Microsoft do not seem to have decided which direction the development should go.
However, if we check out Apple's (NASDAQ: AAPL) iOS and OS X we can't see the same roller coaster. For your iPhone has iOS always been free and you get the latest version OS X Yosemite to your Mac, for free. This is because Apple makes money on their hardware, Microsoft must decide how it will develop their business in the future. Unlike Windows 10, which is designed for all different devices, from smartphones to computers, is OS X just made for Mac and iOS only for iPhone. There is a clear difference between Apple's software products, and at the same time they go hand in hand. I have written a post where I explain why Apple is a good investment, you can read it here: My First Stock: Apple
It's clear with all the different versions that Microsoft makes, that they still want you to pay for the software, this affects their ecosystem negatively. I think it's difficult to sell software and hardware separately as they do. This makes me anxious for a long-term investment in the stock, even if Microsoft has several other exciting things is Windows still the main business of the company. The stock could very well be able to give a good return. However, because the future of Microsoft's core business don't look very good, will I not touch the stock. This is the reason why you shouldn't buy Microsoft, there are better tech investments out there.
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