Search results matching tag 'Microsoft'

Has Microsoft turned the corner?

Jim Jubak — Fri, 23 Oct 2009 19:24:00 GMT

When I added Microsoft (MSFT) to Jubak’s Picks on July 24, 2009 after the company announced results for its fiscal fourth quarter, I wrote “This is as bad as it gets.”

After its Oct. 23 earnings release, the company is now saying the same thing. In the post-earnings conference call, Microsoft CFO Chris Liddell said that the fourth quarter may have been the bottom. Certainly, the company is behaving as if it were: Microsoft resumed buying back shares in the quarter that ended in September, with purchases of 1.4 billion shares.

First quarter earnings for fiscal 2010 fell to 40 cents a share, but that beat the 32 cents expected by Wall Street. Revenue declined by 14% from the first quarter of fiscal 2009 to $12.92 billion. That big drop in revenue came because Microsoft deferred $1.47 billion in revenue from customers upgrading to Windows 7. Put that back in and revenue came to $14.39 billion, a 4% decline from the year-earlier period.

Microsoft beat Wall Street estimates this quarter by cutting costs by more than Wall Street expected. Operating costs dropped 6.9% after the company made its first ever company-wide firings, slashed travel costs, and cut the prices it pays vendors. In the conference call, the company increased its cost-cutting target.

The big question going forward, however, isn’t about cutting costs, but about how many copies of the new Windows 7 operating system Microsoft can sell.

Here, too, the news was good.

Deferred revenue came in above analyst expectations because pre-orders of Windows 7, which officially went on sale on Oct. 22, were higher than projected. The company sold more copies of Windows in the quarter than in any other previous quarter, with sales fueled by demand for Windows 7 and by sales to netbook makers of copies of the older Windows XP operating system.

In the conference call, Microsoft said that it sees the potential for a corporate PC “refresh” beginning in calendar 2010, but expects companies to stretch out their replacement of older PCs (and older operating systems from Microsoft) over a couple of years.

Microsoft also backed up numbers from Intel (INTC) signaling that the PC market could actually show growth of as much as 2% in calendar 2009. Earlier in the year, market analysts had projected that PC sales would decline again this year. (For another way to play the upturn in PC sales, see my recent buy of Taiwan Semiconductor (TSM).)

As of Oct. 23, I’m increasing my target price for Microsoft to $33 by June 2010 from the prior $31 a share.

Full disclosure: I own shares of Microsoft in my personal portfolio.

Sony takes top spot in video games

Douglas McIntyre — Tue, 20 Oct 2009 10:53:00 GMT

Price cuts work. In September, Sony’s (SNE) PlayStation 3 outsold the Microsoft (MSFT) Xbox 360 and Nintendo Wii for the first time in recent memory.

Industry research firm NPD said that the video game industry, which includes both consoles and games, had sales of $1.28 billion in September, up 1% from a year ago.

Sony shipped 491,800 PS3 units in September, moving ahead of Nintendo’s Wii which shipped 462,800 units, and Microsoft’s Xbox 360 which dropped to third place with 352,600 units shipped.

Microsoft and Sony both cut the prices of most of their consoles by $100 in August. That helped sales of the PS3 move up by more than 100% from September 2008.

Sales of consoles are higher, but are profits?

The component costs for video game consoles have probably dropped over the last year, and certainly have dropped since the current generation of players was introduced.

But the price wars among the three major companies in the industry look eerily similar to the e-book price wars among Amazon (AMZN), Wal-Mart (WMT), and Best Buy (BBY). Price discounts may help drive up holiday sales, but the concept of losing money on every sale and making it up on volume by definition never works.

It will not be long before investors know how much price cuts have hurt the bottom lines at the three companies because they are all publicly traded. Shareholders won’t be happy if revenues for gaming move up sharply but margins fall apart.

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

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Six reasons Microsoft will keep the wind at its back

Minyanville — Tue, 13 Oct 2009 17:42:00 GMT

This article is written by Minyanville's Glenn Curtis

Microsoft’s (MSFT) share price has mounted a pretty hefty comeback from its annual lows, and I’m here to tell you that I think the wind it’s had at its back is going to continue.

Here are some of the reasons why Ballmer and crew warrant some love:

1. From a big-picture perspective, even though Mister Softee has arguably lost some of its so-called panache, the fact is, it's going to have a tremendous impact on the way we compute and communicate as far out as I can see. It’s got a big name, a smart management crew, a big float, and it trades some big volumes, which is likely to keep it atop the favorites list at many an institution.

2. Digging a bit deeper, I’d like to see the company come out with one or two blowout quarters. But to its credit, it’s either met or beat expectations in the past three of four quarters -- nothing to sneeze at.

3. With respect to the upcoming third-quarter announcement due out on the October 23 before the bell, the Washington-based behemoth is expected to put up $0.32. My gut feel is that it will at least meet -- and probably beat -- that expectation. And I'm hoping to see a solid performance on the top line (note that analysts are looking for $12.4 billion). Additionally, I'm hoping the company serves up a decent outlook for the rest of the year, and very importantly, sheds some more light on what the coming 12 months might hold for this space.

4. The Street is expecting the company to grow its EPS by a little more than 14% from this year to next. I’m hoping for some sense that this will actually happen.

5. I don't think around 15.2 times this year’s estimate is too much to pay for Microsoft. The shares have plenty of room to run and frankly, they should be trading in the $30s right now.

6. I suspect the shares will remain near their highs, but may punch through ahead of the announcement.

All that said, two things: First, I’d definitely like to see insiders belly up in the open market. Second, because the shares have performed pretty well, I wouldn’t be surprised to see a bit of a pullback at some point. For this reason, I'm looking at this as more of longer-term play as opposed to a trade on the announcement.

Hey -- have a great day!

No positions in stocks mentioned.

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The Kindle and literacy

Douglas McIntyre — Thu, 08 Oct 2009 10:46:00 GMT

Jeff Bezos, the founder of Amazon (AMZN), is being praised as the man who has invented the next big and important electronic device.

That category includes the Sony (SNE) PlayStation 2, the Apple (AAPL) iPod, and the Nintendo Wii. The iPod has sold 200 million units worldwide. That, in the nomenclature of the electronics industry, makes it a once-in-a-generation success, a truly mass market product.

Bezos lowered the price on the Kindle to $249 from $299, and Amazon will release a version this month that can work over wireless networks in 100 countries. There is some compelling research that says people will not pay more than $200, or even $100, for an e-reader. That has not prevented Sony and Barnes & Noble (BKS) from entering the e-reader industry. Rumors are that Rupert Murdoch’s News Corp (NWS) will come out with a product of its own.

The Kindle’s challenge to reach 100 million sales may not have to do with price primarily. It will probably have more to do with people’s media consumption habits. More and more consumers listen and watch media now rather than reading it.

Much of the reason for the rise of the iPod and other multimedia devices is that a growing number of people, particularly younger people, would rather have passive engagement with media than active participation. Listening to music involves nearly no intellectual effort. Reading is an art, at least to the extent that it requires years of preparation and practice to read well enough to go through a metropolitan daily paper or “The Great Gatsby.”

The National Endowment for the Arts recently pointed out that “The U.S. population now breaks into two almost equally sized groups -- readers and non-readers.” The percentage of people who read literature has dropped sharply from 1982 to 2008, according to the NEA data.

A study by the Carnegie Foundation found that only 8% of people under 34 years of age would use newspapers for information in the future. That is not news to anyone in the newspaper industry who watches dropping paid circulation trends for the printed paper and anemic growth in online readership. Part, if not most of the reason for this, is that one in three people in high school drops out before graduation and in some urban areas the figure is closer to 50%.

Less than a year ago, Apple announced that its iTunes store had passed five billion song downloads since its launch in April 2003. Apple has been smart about pricing the iPod. Almost anyone can buy one, because a reasonably featured version costs as little as $79 and will hold 1,000 songs. Apple has not changed media consumption; it has just taken advantage of people’s new habits.

The rise of television did not do the book and newspaper industries any good, but probably did them little harm. Magazines like Life thrived well into the 1960s. Time and BusinessWeek prospered well into the last decade. Newspapers reached peaks of both circulation and adverting revenue in just the last ten years.

It is not shocking that the iPod was released in 2001 and that the popularity of video game consoles like Sony PlayStation 2, Nintendo Wii, and Microsoft (MSFT) Xbox rose sharply. It appears that the turn of the century was about the time that reading habits began to turn sharply, too. Fewer people are well educated and fewer of the educated seem interested in reading. Book stores and newspapers are closing. The iPod is nearly ubiquitous among the young and middle aged.

The Kindle is the product of remarkable inventiveness and it will almost certainly do well. Wall Street research firm Cowen & Co predicted that there will be 1.5 million active Kindle units in the U.S. by the end of this year. By the end of next year, that number should be closer to 3 million.

But, even with quickening demand, the Kindle’s market penetration among U.S. adults is only expected be 4% five years from now. That is shameful in a country where many children have phones that can access the Internet.

The enemy to Amazon’s ingenuity is stunning growth in indifference about reading, at least among those who can read.

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

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Magazine survival depends on digital

Minyanville — Wed, 07 Oct 2009 16:48:00 GMT

This article is written by Minyanville's Mike Schuster

Gourmands, harried fiancées, and dentist office waiting rooms were struck a blow on Monday when publishing giant Condé Nast announced the closure of four of its popular magazines after severe drops in ad revenue.

Elegant Bride and Modern Bride will be ceasing publication as well as the soccer mom handbook Cookie. Gourmet will be shuttered at the release of its November 2009 issue, but will live on with TV programming and online recipes.

See also, Who Needs Newspapers Anyway?

The closures see roughly 180 employees laid off and a collective circulation of more than four million issues stripped from shelves and mailboxes.

Despite the dedicated readership each magazine held, the publications were at the mercy of a three-month study by the management consulting firm McKinsey & Company. After its analysis, McKinsey advised several Condé magazines to cut 25% from their budgets, but no amount of cost-cutting initiatives was able to save the aforementioned few.

Speaking with The Washington Post, Bob Garfield -- a columnist at Advertising Age -- had a grim view of what print publishing's future had in store.

"Your content can be flawless and you can still fail," the Chaos Scenario author said. "The Internet has created a nearly infinite supply of content… which leads to declining revenue and declining ad prices. What you have is a spiraling vortex of ruin. The reason Gourmet is dead is because we are all doomed."

Albeit a tad bleak, Garfield makes strong points about publishers' unpreparedness and/or unwillingness to shift to a working digital model. How so? He made those points three and a half years ago, and little has changed.

Because print publication has worked for centuries, department heads are naturally hesitant to take on a new venture. Those who were slow to adapt were left behind, but those who jumped into unfamiliar waters without adequate planning suffered a similar fate.

Last Wednesday, journalists and publishers met at the UC Berkeley Media Technology Summit to discuss the future of digital publishing. Representatives from Google (GOOG), Microsoft (MSFT), CNN (TWX), and Salon Media (SLNM) addressed the problems that have plagued earlier ventures into online publishing.

At the summit, former editor of The Rocky Mountain News John Temple admitted, "We did not have a clear strategy, mission, or objective. The web was a complement to the paper. That's not a strategy."

Temple's mistakes don't stand alone. Efforts to charge for online content have proven to be a failing model almost everywhere given the glut of similar information available for free. Publications which feature large glossy photos won't translate as well online, but business-oriented sites stand as the rare exception.

On the other hand, as author Stephen King could attest, a complete shift toward online media while abandoning print hasn't worked well either.

And the less said about the hasty, Frankenstein monster of compilation of Time's MINE Magazine, the better.

Although it seems like they're grasping at straws without a careful eye toward the future, publishers aren't all to blame. Advertisers have yet to pin down a working revenue model for the online markets and thus have been slow to adopt the format for the last 10 to 15 years.This reluctance has forced publishers to stick with the tried-and-true print publishing -- even though the "true" has already faded.

But there's been a recent shift. While online ad revenue took a noticeable plunge this year -- down 5.3% from last year -- its percentage of the overall ad spending is on the rise. In the UK, it's even surpassed television. That's extremely promising for online models.

And if doomsday analysis and increasing online revenue wasn't enough, we may see a major shift toward online publication come early-2010, when Apple (AAPL) unveils its new tablet computer.

Even though Amazon's (AMZN) Kindle has increased the number of downloadable titles -- even periodically outselling the hard copies -- wood pulp and ink still prevails. A screen of different shades of gray doesn't prove to be a significant advantage over the printed page.However, once Apple releases a portable color display -- like a large iPhone that produces dynamic video and audio -- it could warrant a huge migration toward digital content.

And it's already begun: Last week, Gizmodo reported that Apple has been in talks since July with publishers like McGraw-Hill (MHP) and Oberlin Press to move textbooks to iTunes -- a boon for students of all ages. AppleInsider mentioned that Apple also contacted The New York Times to put their content on "a new device." And if the company can ever patch up its relationship with Google, think of what its Library Project could do on a portable tablet device. See also, The NY Times Will Be an Outsider in San Francisco.

The publishing world is on the precipice of a monumental shift, and these currently flawed models are merely prolonged stopgaps on the way to successful -- and profitable -- digital content.

As long as everyone looks before they leap.

No positions in stocks mentioned

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Apple's iPods go quiet in Europe

Minyanville — Tue, 29 Sep 2009 19:33:00 GMT

This article is written by Minyanville's Mike Schuster

Tsk tsk, volume abusers. In between tucking in your shirt and wiping the dirt from your face with a saliva-soaked thumb, the European Union has noticed that you might be setting your MP3 player just a tad too loud. So they're gonna go ahead and limit that for ya.

In strict accordance with the "If it's too loud, you're too old" mantra, 52-year-old Meglena Kuneva -- the EU's Consumer Affairs Commissioner -- said that the division will be drafting an industry-wide ordinance to limit the default volume on digital music devices sold in Europe. And since the standards will apply to all players, companies like Sony (S), Panasonic (PC), and of course Apple (AAPL) will have to readjust the settings on their popular MP3 devices.For more on Apple products, see Overhyped Products: Apple Newton.

In addition to the default settings, a health warning will be displayed when the user chooses to override the default maximum volume settings -- a guilt trip worthy of a long-distance phone call from your mother reminding you to wear your jacket.

Speaking at a news conference on Monday, Kuneva said she hopes that this initiative will limit the cases of hearing loss with younger patients. "If you want to enjoy your favorite songs in 20 or 30 years time, turn the volume down," Kuneva said in defiance of personal responsibility.

An EU scientific body stated that among the estimated 50 to 100 million Europeans enjoying their iPods and Zunes (MSFT) on a daily basis, up to 10 million are risking permanent damage by blasting Pete Townsend solos far too loud. The group warned that levels in excess of 89 decibels for a period of one hour a day could result in tinnitus or irreparable hearing loss after five years of regular use.

As it stands, maximum volume for MP3 players range roughly between 80 and 115 decibels, the EU's executive commission said. With internal earbuds and special headphones, the volume could potentially exceed 120 decibels, or the equivalent to the roar of an airliner during take off. The new standard -- which, Kuneva stressed, can be adjusted -- will be placed at 80 decibels, or the equivalent to a busy city street.

Apple is all too familiar with the volume output standards in Europe. Back in 2002, Apple was forced to pull the iPod from shelves in France because the device was capable of producing levels louder than 100 decibels -- the level a French law has regulated for all its players.

This current EU proposal continues the government's – particularly in the UK -- trend of regulating matters that ought to be maintained at one's discretion. Between trans fats, motorcycle helmets, and the overabundance of closed-circuit cameras, they're the political equivalent of helicopter parents, instilling the growth of vulnerability and subservience within the public mindset.

Of course, adults should be left to decide how loud their music should be -- as long as their next door neighbors don't have to hear it -- but what about the younger set? Shouldn't they be guided to make the responsible decision and prolong their hearing?

Well, considering that the default level can be readily adjusted, it's safe to assume the teens who have the know-how to download an album from BitTorrent and sync it with their iPod are also able to navigate to the MP3 player's settings and boost the maximum level -- thus completely negating this EU proposal by the very demographic they're trying to "help."

It's a curious push -- one that conjures more "Nanny State" allegations than its lack of totality and effectiveness dictates -- but the public should always be wary of what the government is attempting to regulate "in their best interest." The majority of music fans wouldn't have appreciated a meddling buttinsky telling them their music is far too loud.

Except for maybe the aforementioned Pete Townsend.

No positions held in stocks mentioned

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Microsoft's top-secret tablet unveiled

admin — Wed, 23 Sep 2009 22:59:00 GMT

By Andrew Horowitz

Microsoft (MSFT) has been doing what it can to finally work on the offensive. Bing search is now making significant progress against rivals and Windows 7 is getting excellent reviews. There is even talk that the next generation Zune HD will become a serious contender, along with the recent upgrade to the Xbox gaming/entertainment console.

The retail stores I am still scratching my head about, but I will wait to comment until that plan is either launched or squashed.

Now we are seeing the first glimpse of what could be the next generation of tablet computing. If you recall, this has been on the mind of Microsoft and Bill Gates for years. The first attempts were met with luke warm reception. But that was then. Computing power is now much more significant and much more energy efficient. The photo (hat tip Gizmodo) shows a device that opens like a book or traditional day-timer and has both pen and touch-screen input. Could this be a real competitor to Apple's (AAPL) 10" tablet, expected to become available in February 2010?

For one, it will probably interface much better in an Office environment. That would be a big plus. Then, if Microsoft is actually controlling the specs and design, we could possibly finally have a more proprietary hardware product that will diminish the problems with comparability. That will help to offset the upgrade problems we have seen on PCs. I for one have utilized the handwriting recognition software on the early Windows devices and on new ones. It works very well (with a bit of training) and have found it to be much faster than touch or key entry.

Gizmodo calls it "astonishing": "Courier is a real device, and we've heard that it's in the "late prototype" stage of development. It's not a tablet, it's a booklet. The dual 7-inch (or so) screens are multitouch, and designed for writing, flicking and drawing with a stylus, in addition to fingers. They're connected by a hinge that holds a single iPhone-esque home button. Statuses, like wireless signal and battery life, are displayed along the rim of one of the screens. On the back cover is a camera, and it might charge through an inductive pad, like the Palm Touchstone charging dock for Pre. Until recently, it was a skunkworks project deep inside Microsoft, only known to the few engineers and executives working on it -- Microsoft's brightest, like Entertainment & Devices tech chief and user-experience wizard J. Allard, who's spearheading the project. Currently, Courier appears to be at a stage where Microsoft is developing the user experience and showing design concepts to outside agencies."

When and where we will really see this is yet to be known. But if this photo/info is true, Microsoft best get moving to try to get ahead of the February Apple move.

Why stocks aren't overpriced

Minyanville — Wed, 16 Sep 2009 14:26:00 GMT

This article is written by Minyanville's Sean Udall

Listening to CNBC yesterday morning I was struck by two key things: First, there are obvious factors/evidence that many are choosing to ignore. Second, we should always be mindful of what may not be obvious and try to skate to where the puck is going to be.

However, sometimes the obvious meshes with where the puck is going. I find this especially true during times of great collective doubt.

Read Our Marionette Economy for an opposing viewpoint.

Post 1991, it was very popular to doubt the rally. We were at war and the S&L crisis was far from being declared dead. It was an incredible time to believe that stocks deserved to be pushed higher -- especially in light of numerous signs of profound growth in many industries.

Moreover, when I hear that the market price is "unjustified" by "current fundamentals," I simply know we're going higher in the intermediate term and longer. My point is, that statement is just factually wrong.

Aside from trailing P/Es -- which are hugely artificially depressed by the now-defunct FAS 157 rule -- the market is still quite cheap on nearly every other balance-sheet metric. Further, P/Es are rarely thought to be fair barometers of market valuation at and near earnings troughs.

Normalized P/Es adjusted for the accounting changes should be used, yet you'll rarely see these sorts of analyses in print. But they're used by CIOs and investment-committee meetings as well as complex blackboxes. And these are saying that stocks are still well valued against competing asset classes.

Additionally, I called for much stronger economic growth months back and was nearly universally ignored. Now that multiple signs of confirmation are at our backdoor, most pundits are simply choosing to ignore them. And those that talk about the strength are thought to be Pollyannas. So here's a short list of confirming data points:

Just yesterday we saw surprising strength in retail sales.

The semiconductor strength is far beyond a restocking effect and, if anything, we need a full inventory restock in the silicon food chain. When this happens, what will the numbers look like?

In my view, we'll see continual signs of technology strength in routing/fiber, wireless infrastructure, enterprise storage (very strong), and IT software installs. Again, this isn't inventory related.

Very strong numbers in US GDP, ISM (Institute of Supply Management), Philly Fed, and Empire reports.

Months of strength in Germany, the UK, and much of Europe.

Oh, and I'm no longer alone in my contrarian economic view: Goldman has joined the black parade, calling for stronger GDP growth on a macro level. On a micro level, it's been on an upgrade rampage in recent weeks and just a few days ago, upped the whole industrial sector, raising ratings and/or price targets on General Electric (GE), Danaher (DHR), Dover (DOV), 3M (MMM), Illinois Tool Works (ITW), Roper Industries (ROP), United Technologies (UTX), Parker Hannifin (PH) and Kimberly-Clark (KMT). I don't think Goldman would be doing this if they were betting on the double-dip trip. (Illinois Tool Works also just raised guidance yesterday.)

Aside from economic fundamentals, a primary reason I still see sizable upside in the coming months is because we still have multitudes of names like Google (GOOG), Cisco Systems (CSCO), Broadcom (BRCM), Microsoft (MSFT), JPMorgan (JPM), Nasdaq OMX Group (NDAQ), NYSE Euronext (NYX), and best-of-breed solar that haven't moved much given the improved backdrop.

So while a Baidu (BIDU) or Marvell Technology Group (MRVL) or STEC (STEC) may look like they've moved far too much off lows (but likely not yet), many more high-quality names have experienced a fraction of the move higher.

So while I called for a 7-8% correction (see buzzes) about 5% ago, I still see the forest, the trees, and the shrubs. And from my perch, I think we're far from seeing the majority of this total move off lows in a fairly compressed time frame. Even so, I'm still operating from my trading standpoint, and thus sticking with my correction call. I remain largely long, but with sizable hedges and proactive premium collection strategies while actively trading around my core Nifty 15.

Positions in GOOG, JPM, NDAQ, WFR, SPWRA, MRVL.

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Apple vs. Microsoft - More than a cute ad war

Louis Navellier — Wed, 09 Sep 2009 16:55:00 GMT

Apple (APPL) has almost single-handedly redefined the consumer electronics market with innovative products, from changing the way we listen to music to redefining the role of cell phones.

But don't think this company is all fun and games. Apple continues to make inroads into the computer market and erode the market share of fellow tech icon Microsoft (MSFT). The Mac vs. PC rivalry is more than just a cute ad war.

Bing: Apple or Microsoft - who's winning?

Actually, I'm a big fan of those Mac vs. PC ads -- and not just because they're funny. I think they provide a glimpse into the corporate culture of each company. Apple is, at heart, an inventive company looking to grow by creating the next big thing. On the other hand, Microsoft is an established giant that keeps doing what it has always done well … then using the profits to purchase a smaller company's ideas and leverage them to even bigger returns. Apple's strategy is obviously much more glamorous and appeals to image-conscious consumers, however both of these strategies have merit.

Which of these tech powerhouses is a better investment right now? Take a look at some numbers:

	Apple	Microsoft
Market Cap	$149.50 billion	$145.42 billion
2Q Earnings	$1.35 per share	$0.36 per share
2Q Surprise	15.4%	+0.0%

Apple Thrives on Innovation

In 2004, as Apple's iPod started to gain widespread appeal, and its iTunes store became one of the premier marketplaces for digital music, I quickly realized the potential of this company's innovative approach to consumer electronics. I told subscribers to my Blue Chip Growth newsletter to buy this stock, and we rode it for almost four years to close out a stunning 250% profit in late 2008.

Many investors ask me if I think the stock is good investment right now. My simple answer is, "not yet." Here's why:

First, Apple thrives on innovation and managing its product cycles, and despite rumors about the company launching its own netbook "tablet," Apple doesn't have any new blockbuster products on the immediate horizon.

Apple's Soft Spot - the iPod

Second, the volatility in share price caused by speculation over Steve Jobs' health makes this stock a little too risky for my tastes. A blue chip stock with a market capitalization of almost $150 billion should be a heck of a lot more stable than AAPL.

I run intensive screening and data-mining on more than 5,000 stocks each week that focus on two key factors: a stock's current strength and its potential for future growth. So how does AAPL stack up on these two fronts?

Strength:

Apple sure has current strength. This summer, the company's sold over 1 million next-generation 3GS iPhones in just three days after the new product hit the shelves in June.

What's more, the company said it sold 2.6 million Macs in the second quarter, up 4% from a year ago, as the company continues to slowly gain a bigger share of the computer market. It's performance like this that helped Apple increase both its 2Q profits and 2Q revenue by more than 10% compared with 2008.

Growth:

The future, unfortunately, is not quite as impressive for Apple. While the latest iPhone numbers are good, smart phone sales in general have been very strong, and AAPL hardly has the market cornered now that rivals like the Palm Pre and the Blackberry are gaining appeal.

What's more, it shipped only about 10 million iPods in the second quarter, down 7% year on year.

There are rumors that Apple may be gearing up to take on Amzon.com's Kindle e-reader, but any investor who puts his or her money behind a rumor is taking a risky gamble. Since this company relies on a strong product cycle, without any highly-anticipated offerings on the horizon, I have to be skeptical of Apple's future prospects.

Microsoft Thrives on Domination

Microsoft and I go way back. In fact, MSFT was one of my first-ever recommendations in my Blue Chip Growth newsletter. I told subscribers to buy the stock in August of 1997, and we sold in early 2000 for a return of 123%!

We got out just in time too, because the harsh reality is that Microsoft really hasn't done a lot of great things since the go-go days of the tech boom. Not that I blame them. Windows is a cash cow, and the software has achieved a level of dominance that is almost impossible for any product. This company is the true definition of a powerhouse with staying power.

But being a powerhouse doesn't mean Microsoft is a profit machine. Like Apple, I give Microsoft a very similar rating: good current strength, but limited growth potential. Here are the details:

Strength:

You just can't beat Windows or other Microsoft products. Even my Mac laptop uses Microsoft Office for word processing and spreadsheets, and PowerPoint has become synonymous with any visual presentation. MSFT is just as dominant as it ever has been in the software market.

Growth:

Aside from a foray with its Xbox, Microsoft hasn't come up with any new revenue streams in a very long time. This means sales growth is incredibly difficult to come by -- unless, of course, MSFT just repackages existing software and tries to get people to pay them again for an updated product. Not a very bright future for increasing profits and sales down the line.

Yes, the company has made a move to buy Yahoo! and is pushing into the search engine marketplace, but those moves will take a very long time to pay off. After all, it is going against Google -- an Internet behemoth that has achieved the same dominance in its industry that Microsoft has achieved in software.

Apple Is Better Than MSFT, But Not Great

All in all, if I had to pick between the two, I would rate Apple as the winner. This stock is an OK investment, since one or two good product offerings could send shares soaring, and Microsoft is very slow when it comes to new ideas. But I would hardly mortgage the farm for this tech pick at this point in time.

Remember, this is just my take on Apple RIGHT NOW. As the past year has taught us, things can change on a dime on Wall Street. Here are some things I'd like to see happen at AAPL before I give this stock a ringing endorsement:

Renewed Focus on Computers -- I'll admit that I'm part of the Apple army, and I use a MacBook Air laptop when I'm on the road. But if this company wants to continue to maintain its presence in the computer market, it needs to continue to innovate and manage its products with the same zeal as its consumer gadgets. The iPod and iPhone were smash hits, but Apple needs to be competitive with its operating system and computers if it wants to really grow and thrive.
Less Focus on CEO Jobs -- I don't know how to make the future of Apple less linked to Steve Jobs' medical records, but it needs to happen for me to have faith in this stock. As of right now, all it takes is one blog post about Jobs to send shares reeling, and that doesn't sit well with me. I want a stock to move based on its sales and profits, not on the rumor mill.
More Impressive Numbers --For all the hype, the company's earnings performance hasn't been as impressive as I like. Yes, Apple has been growing its bottom line even in a recession; margins are at about 36%, so earnings and revenue are moving in lockstep. A larger profit margin would help earnings explode higher on even a small uptick in revenue -- or allow the company to significantly grow earnings even if sales stay flat.

At the time of publication, Louis Navellier held positions in both Apple and Microsoft.

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InvestorPlace — Thu, 03 Sep 2009 19:56:00 GMT

This article was written by InvestorPlace's Nick Atkeson and Andrew Houghton.

The adage "Sell in May and go away" certainly did not apply this summer. MarketWatch reports that since 1950, the two worst months in which to invest are August and September.

Well, so far, 2009 has proved to be an exception as we smashed through August with one of the best performances on record. And September may very well disprove the historical data and reward stockholders with another round of hefty gains.

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So, to make your Labor Day labor-free, we've compiled three of the best trades for you here.

Trade #1 -- Office Depot (ODP)

Office Depot (ODP) fell from well over $40 per share to a low of 59 cents during the 2008 bear market. Today, it is around $5 per share, and institutional option investors believe the stock is still too cheap.

On July 27 and 28, in the wake of the company missing earnings and with the stock trading around $4.50, these investors bought roughly 45,000 Jan 5 Calls (ODPAA) and sold roughly 45,000 Jan 5 Puts (ODPMA). This "risk-reversal" trade shows a tremendous amount of conviction that the stock will be above $5 per share in January.

Get six more labor-free Labor Day trades here!

If you believe the corporate world will continue to improve from Labor Day through the end of 2009, ODP appears to have set a downside limit price of $5 combined with uncapped upside potential. With the stock currently trading at about $5, ODP is offering a profit ticket in a better economy.

Trade #2 -- Microsoft (MSFT)

Back-to-school and Windows 7 are two huge drivers for Microsoft (MSFT) heading into the rest of the year. With the summer coming to an end, we are all headed back to work. For most of us, Microsoft is our primary work tool, and many of us will want the latest and greatest. For corporations that are currently running on Vista, Windows 7 can't come fast enough.

We saw evidence of Microsoft's strength during the last week of August as Dell (DELL) reported better-than-expected earnings and talked about some seasonal improvement going forward (80% of Dell's customers are corporate accounts), and Intel (INTC) raised revenue guidance during its mid-quarter update.

Earnings estimates for MSFT for this year and next are $1.70 and $1.93, respectively. The stock is currently trading at 12.7 times the 2010 earnings estimate, which is likely too conservative. If there is one back-to-school purchase you should make, it's MSFT.

(Microsoft publishes MSN Money.)

Trade #3 -- International Paper (IP)

Global production in the pulp, paper and publishing sector is expected to increase by 77% from 1995 to 2020, which is great news for International Paper (IP). Back-to-school shopping and an improving economy are key drivers of paper consumption currently.

With revenues up, IP's management is rapidly cutting its debt burden from a high of $12.7 billion to roughly $9.5 billion by year-end 2009. On July 30, the company reported Q2 earnings per share of 20 cents versus the consensus estimate of 0 cents.

IP and most of the stocks in the paper and paper products group are flying higher. It looks like the sky is the limit. For the stock to return to its historical value over the past five years, it should double from its current level.

ODP, MSFT and IP are poised to be three of this fall's best trades -- click here for details on six more top stocks to buy now.

At the time of publication, the authors held positions in ODP and MSFT.

Image credit: Coolcaesar, GNU free documentation license

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