Microsoft: Look at This Chart Before You Decide

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Judging from the 7.28% "Ballmer Bounce" that followed his announcement, the markets love the idea of long-suffering Microsoft CEO Steve Ballmer stepping down.

So do a lot of investors who believe now – finally – it's time to buy Microsoft.

But is it?

Can the company bring in a new CEO with vision? Can it finally begin to understand content? And is it willing to jettison employees and products that aren't "worth" what the legacy suggests?

I could write you some long, eloquent essay on the merits of corporate turnarounds.

Instead, I'm going to show you one simple chart…

To me, it's clear: All good brands have their day.

As recently as March 2009, the Redmond-based behemoth enjoyed a 90% market share in connected devices running Microsoft systems.

Today that's shrunk to less than 25%, which leads me to believe that Microsoft has had its day.

Some could argue that's because the number of devices has increased dramatically over the same time frame. But remember, there are going to be 7 billion interconnected devices on the planet by the end of this year and roughly 50 billion by 2020 – seven for every person alive on the planet today.

Apple recognized this early and changed the game with its tablets and its iPhones. Ballmer misjudged their impact and was dismissive. So did Palm, RIM, Dell, Gateway, Wang… and we know where they are today, after watching their share of interactive utilization and connected devices plummet.

Apple stock shot up more than 5,300% since January 2001. And Microsoft…

Well, let's just say that to call it "stagnant" is an insult to truly stagnant stocks. It's returned 24.26% over the same time period – and that only comes after a 23% rally since the top of 2013 alone.

As for the previously mentioned Ballmer Bounce…

The market quickly gave most of it back, dropping 5% over the following three trading sessions. It looks like the Street doesn't believe a new CEO will have any more luck righting the listless Microsoft ship.

My good friend Barry Ritholtz, CEO of Fusion Capital, put it this way during a recent conversation: "Microsoft stopped setting the agenda 18 years ago."

I agree. Windows was its defining moment, and the company has been playing a game of "me too" ever since.

The real question: Can the stock recover now that Ballmer is going out the door? I wouldn't bet on it.

Join the conversation. Click here to jump to comments…

About the Author

Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs The Geiger Index, a reliable, emotion-free guide to making big money and avoiding losses, and Strike Force, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.

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  1. juan | September 3, 2013

    So what does Shah have to say about this, now theres a microsoft buy and sell recommendation from the same website.

    Did you write this before the news of the Nokia takeover?

    • Keith Fitz-Gerald | September 3, 2013

      Hi Juan,

      Yes it’s true that Shah and I disagree on Microsoft. It does not happen often that our editors disagree on a stock, but it does happen. Obviously you must read Money Morning closely to have even noticed – so thanks for being a loyal reader.

      And yes… I did write this before the Nokia news broke but predicted the acquisition several months ago during one of my TV appearances on Fox Business in addition to mentioning it in MM. I think they have to team up to stand any chance of survival.

      Keith :-)

  2. steve | September 5, 2013

    LibreOffice is a serious replacement for Office that does just about everything you could do with Office. And it's free open source. Oh, and highly compatible.
    http://www.libreoffice.org

    • Keith Fitz-Gerald | September 6, 2013

      Thanks Steve.

      I am not familiar with that suite but will be taking a close look based on your recommendation.

      Best regards for great investing,

      Keith

  3. Brad M | September 13, 2013

    I would be carefull to call MSFT dead. It certainly seems the industry is leaving them behind, but remember years back when they said the same thing about Apple, and look at it now. And who did Apple go to for funding to revive itself via the Iphone? It was Microsoft. Look into some divisions they ( MSFT ) have working toward quantum computers and nanotech ( the real next generation of hardware ), and the fact they have the capital reserve to make them happen. Maybe a mediocre stock short term, but long term, MSFT could have an apple like resurgance. Plus, its stock has had some positive movement over the last few quarters.

  4. H. Craig Bradley | September 15, 2013

    CONTINUING DECLINE

    Continuing is what so many organizations do- its all they can do. Blame it on Bureaucracy or inertia. Take a look in Downtown Portland at the Federal government offices. Each agency, be it the U.S. Forest Service or the Army Corps of Engineers, are doing the same jobs in the same way and often, with the very same people as they did back in 1984.

    Private Sector. Sure, go to Safeway in Downtown Portland and tell me its not the same retail grocery store it always was, with the same amount of broad daylight shoplifting you typically see in other inner city areas. If you are the least observant, you will notice the meth addicts hanging around the store entrances or nearby. Tell me it looks improved. You have to be blind or real stubborn if you don't see it.

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