Can New Leadership Turn Microsoft Around?


Microsoft ( MSFT ) has had two strong days Tuesday and Wednesday, defying an analyst's downgrade.

On Tuesday, an analyst at Citigroup lowered his rating from buy to neutral. After dropping at the open, the stock reversed, backed by a strong rally in the general market, and finished up more than 2.3%. On Wednesday, it was up nearly 3%. It seems to have found support near its 200-day moving average.

Microsoft was one of the great growth stories on the 1980s and 1990s. But since the market top in early 2000, it's gone nowhere.

It's essentially moved sideways and has failed to reach its all-time high of 53.98 set on Dec. 30, 1999.

But earnings have been rising, although not as fast as the 1990s and in an uneven manner.

In the most recent quarter, Microsoft reported a 17% earnings increase, although analysts are forecasting an 11% decline in the next report.

The company pays an annual dividend of $1.12 a share, which works out to a 3.1% yield.

It has a three- to five-year dividend growth rate of 17%.

It offered a 9-cent-per-quarter dividend in 2006, which it has raised to 28 cents this year.

Microsoft has some serious problems. Its mobile operating system is lagging well behind those of competitorsApple ( AAPL ) andGoogle ( GOOG ).

CEO Steve Ballmer is leaving, and the company is seeking a high-powered replacement who can get the company back in the forefront of innovation.

The company was reported to be courting Alan Mulally, who has been credited with revivingFord ( F ). But the chief executive recently said he plans on staying with the automaker.

The Citi analyst who downgraded Microsoft cited fears an insider would get the top job and fail to energize the company.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: AAPL , F , GOOG , MSFT

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