Through TheFLY's Eyes: Microsoft Corporation

from Theflyonthewall.com












Gates Coming Off the Hinges

Two nights ago I caught a bit of Jim Cramer's "Mad Money." During the segment, Cramer told a viewer that had asked if Microsoft (MSFT) had bottomed that he was getting killed owning the stock in his charitable trust, and that he did not recommend buying it.

After the show, I planned to write a blog with a contrarian view, on my belief that the stock was on sale because it was out of style, not because it was of poor quality, and that Vista and the Xbox 360 would be the catalysts the stock needed to finally drive it up. I felt this was a great entry point. I almost made the mistake of writing the piece and predicting a bottom for a falling stock. Much to my good fortune, I did not have time to write this piece yesterday.

If I did have time to write that blog yesterday, I would be apologizing after two separate pieces of negative news came out. What a difference a day makes.

Last night, Bill Gates announced a two-year transition where he will focus on the Gates Foundation full-time and reduce his role at Microsoft to a part-time capacity, and this morning, as part of its continuing options backdating witch-hunt, "Page One" of the Wall Street Journal highlighted Microsoft's stock options practices from 1992 to 1999. Unlike the other companies being accused, however, Microsoft voluntarily stopped the practice and disclosed it back in 1999.

These two headlines will probably put a little more pressure on the software giant, but do not change my thesis that fundamentally the company is undervalued and just out of the Street's favor. I would not suggest buying the stock until after its possible reaction from these headlines, but do believe afterward, it will be oversold and a buying opportunity.