Martin T. Sosnoff on writes that he is underweighting Microsoft and considering getting out of the stock altogether. He notes certain poor management decisions including dilution from options, poor choices with dividends, working capital, and investments.

For the fiscal year ended June, Microsoft bought back almost $8 billion in shares, about 3% in its equity base and half its cash flow. All this accomplished was the offsetting of dilution from options. You do what you have to do to keep talented management in place, but it is an incredibly high price to pay and doesn’t go unnoticed.

But he does have one reason for staying in Microsoft: “Gross margins are over 80%. There are no other businesses on this scale with $40 billion in revenue that sport this profile.”

So the question is shoud investors own a stock that seems more inerested in taking care of managemen than investors. Considering that Microsoft shares were down 30% over the past five years ended June, I’m thinking hat this is not a stock for me.

One Response to “Microsoft”

  1. Chris J says:

    I think Microsoft is an excellent short term investment. They have more new products hitting the shelves in the next few months than they had in more than 5 years. I also think that Bill is in the process of shaking things up at Microsoft internally in order to stay competitive with Google. The vast majority of investors have written off Microsoft and I think this will prove to be a mistake. I think you will see the stock price go to at least $35-$45 price range. Now is the time to buy in order to get ahead of the release of the Xbox 360.