Two Numbers Microsoft (Nasdaq: MSFT) Doesn't Want Investors to See

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Microsoft's (Nasdaq: MSFT) new CEO Satya Nadella could bring the company what it's been missing, as we recently pointed out, but Nadella will have to tackle two very troubling numbers just reported for Microsoft.

Microsoft
NASDAQ: MSFT
Sep 19
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Price: 47.52 | Ch: 0.84 (1.8%)

These are figures that give us a glimpse of what could prevent MSFT stock from climbing in 2014 following its 40.9% rise last year.

These numbers were just released last week - and they're ugly. Here's the story.

A Slide in Market Share in the Gaming World

Microsoft's Xbox One and Sony's PlayStation 4 were both released in November 2013. XBox sales beat out PS4 sales over the holiday season in December, but Microsoft failed to keep its momentum going in the New Year.

According to an online statement from Sony Thursday, Feb. 13, Sony's PlayStation 4 sales were No. 1 in sales for the month of January, "nearly doubling the nearest next-gen competitor" - including Microsoft's Xbox One. Sony cited research by consumer market research firm NPD Group.

"PS4 led overall hardware sales this month, followed by the Xbox One," the NDP report confirmed. No actual sales numbers were made available, including for Microsoft's and Sony's other notable gaming console competition, Nintendo.

Also last week, Microsoft announced its newly appointed PC gaming guru Jason Holtman is departing, only six months after his hire.

Microsoft is struggling to find its footing in PC gaming right now, and there's a lot to lose.

According to NDP, consumers spent around $1.05 billion on the videogame industry in January, including sales made through digital downloads, used games, social games, and rentals.

The troubling Microsoft number comes from the PC side of business...

A Decline in Operating System Sales

Microsoft's Windows 8 operating system (OS) isn't selling nearly as much as its predecessor, Windows 7.

Compare 200 million in license sales since Windows 8's launch 15 months ago to Windows 7's 240 million license sales within its first year.

Windows 8 has suffered from bad publicity and consumer reluctance, to the point where Hewlett-Packard Co. (NYSE: HPQ) in January said it would offer some new PCs with the older Windows 7 system.

On top of that is the steady decline in personal computer (PC) sales worldwide, which are being rapidly replaced by tablets and smartphones. In the fourth quarter of 2012, worldwide tablets sales reached 52.5 million units, double the number from the same period a year earlier. Meanwhile, PC sales fell 6.4% year over year to 89.8 million units.

Microsoft's release of its Q4 2013 earnings in late January showed a 3% drop in sales of Windows to the consumer PC market.

Here's where these figures leave MSFT stock.

What Investors Need to See from Microsoft (Nasdaq: MSFT)

Microsoft stock had an excellent 2013, registering a 41% increase, despite the overhang from the languishing PC market and uncertainty over who would succeed outgoing Chief Executive Officer Steve Ballmer.

To repeat those gains, Microsoft has to show it has a strong strategy for dealing with the continuing shifts in the technology landscape going forward.

In terms of mobile technology, Microsoft spent $7.2 billion to buy Nokia Corp's (NYSE ADR: NOK) mobile phone business in fall 2013. The move was an expensive admission that the company's smartphone strategy hasn't yet worked.

Expect an update on the progress of the integration of this unit. Also, sales of the Surface 2 tablet will indicate whether Microsoft is finally getting a foothold in the mobile market that has so long eluded it.

Finally, pay attention to how well newly appointed CEO Satya Nadella fits in at Microsoft - and whether his vision will steer the company to new highs or lows.

Finding the best tech stocks is a lot easier when you know what the major tech trends are going to be. That's why we took a good look at what happened at the recent Consumer Electronics Show (CES), and here are the investment ideas we came up with...

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