MSFT stock tanks - why?

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Posted by Jim on Sep 29, 2008 47 views

Why did Microsoft stock drop yesterday lossing almost 25.10 -2.30 (-8.39% of its value) on Sep 29? Well it would appear that Microsoft is not impacted by the current financial crisis. In act, its 52Wk Low: 23.50 and 52Wk High: 37.50 show that the leadership still doesn’t have the confidence of the street. This latest plunge isn’t anything new - ifact the huge rise in the past year was a fluke on the past 5 years performance of the stock.

What will it take for the street to have confidence in Microsoft and raise the stock price? Most likely nothing. There is too much stock out there, and rising the price in Microsoft requires a huge amount of capital in the market. And Microsoft is going to sell Office and Windows next quarter and next year. There is no gamble or risk to make it exciting to gamble on Microsoft for huge gains. It may just be that Microsoft is too big for MSFT to move.

But when the market crashes, it crashes hard with everyone else. What do we call a stock that is undervalued, moves up slowly, slower then the market, but crashes down with the market?

I do not know of any of the leadership at Microsoft. I have met and spoken with a few of them personally, and always been impressed. But then they leave. Who are the up and coming leaders who will take Microsoft into the next decade? Will it continue to be Ballmer and another 5 years of virtually flat stock prices?

And at the same time we have the executives discussing how to give themselves bonuses. Give them a loan of stock and give them all the uptick as the stock goes up. I believe they are called stock options.