Microsoft (MSFT) is the world's largest software maker with a dominant position in operating systems and business productivity applications. In fact, the software giant runs more than 90 percent of all PC's currently in use. The saying goes that you don't really own your personal computer, Microsoft does.

The advancing age of corporate PC's and the recent surge in PC sales means that it is now time to buy Microsoft again.  Robust PC sales means that a new product cycle has begun and Microsoft Windows 7 stands to gain.

In addition, Microsoft is introducing exciting new products like Office 2010 and the Windows Azure Platform. For the gaming industry, Project Natal, a controller free input device, may become a smash hit.  Meanwhile the Bing search engine continues to surprise as it slowly takes market share from Google. 

The future vision of the company is based on utilizing the internet through "cloud computing".  Microsoft's goal is to create a seamless user experience across multiple devices from PC's to cell phones to home entertainment systems. The company intends to charge for services across these platforms as it creates software that would be reside on its servers and allow users to gain access by using the internet. 

The financial picture of the company shows a firm with incredible strength.  Microsoft generates over 1 billion dollars a month in free cash flow. The company has little debt and 31 billion dollars of cash on hand.  The company has paid out 130 billion dollars in dividends and stock buy backs in the last five fiscal years.  Its yield is just under 2% and with a 29% payout ratio, there is plenty of room for that dividend to grow.   

Microsoft is leveraged to the growth of the internet and is on the verge of a new product upgrade cycle. It is positioned with exciting new products and has a unique diversification not matched by Google or any other firm.  The stock trades at a low price to earnings multiple of 13. This is an exciting growth situation in technology from an industry leader.  Look for a move back to 30 short term and 40 longer term.

The risks to the price of the stock include a sluggish global economic recovery, a slowdown in PC sales and problems with new product introductions and performance.

eWorldvu.com is placing a good to cancel order to buy 300 shares with a limit price under 28 for the market open on Tuesday February 16, 2009. The MSFT investment will be made for the Model Growth Portfolio.  Disclosure: eWorldvu members have a long position in Microsoft.

(As always, please do your own due diligence prior to making any investment)

http://www.eworldvu.com 

Update on Monday, March 1, 2010 at 08:05PM by Jim Smith

Since the price has not dropped as much as we expected and we still love the stock of microsoft, we are changing our open order effective Tuesday March 2, 2009.  We are placing a good to cancel order for 200 shares at a limit price of 28.50 for the Model Growth Portfolio. 

Update on Tuesday, March 2, 2010 at 03:35PM by Jim Smith

Bought 200 Shares of Microsoft at 28.50