Yawn. Given iPad for Office was started before Satya was CEO, Ballmer made serious bets on mobile (yes, the WP ecosystem, but something different for MSFT), AND Gates was on the board, discounting Ballmer and Gates at the start of the second paragraph is ... I'll say interesting, my gut says "dumb". Both Gates and Ballmer are on the board and were likely well aware of what's up and Gates gave up chairmanship to help Satya on technology issues.
I suspect parts of Redmond are still Windows uber alles, but, Microsoft has been doing non-Windows products for 30+ years.
I would take a dividend paying stock that is slightly under performing than the market, than a non dividend paying one. Also everytime a dividend is issued, the price is adjusted for any possible arbitrage.
If you were to solely depend on S&P500 as the index for performance, I guess investments in Lockheed Martin would be a waste.[1]
As mathattack said, the SPY fund pays out dividends too (from the 500 items in its basket).
Person A has 100k to invest, and puts it all into Microsoft. He's betting MSFT will outperform the rest of the industry, and likely all industries. Presumably he spent some time and effort to research this decision, seeing as investing in a single stock is risky.
Person B wastes no time, makes no predictions, and just puts 100k in the general market. He gets the average appreciation and average dividend returns along the way.
Person B ends up ahead: less risk (one vs. many), better returns, and zero time in research.
Well your assumption that a stock has to outperform a specific market index to be consider worthy is not true. S&P500 is just an index of 500 capital sorted hand picked companies.
You made some flawed assumptions:
[1] All companies in the index pay dividends.
[2] MSFT is not one of the companies in the index.
[3] There is only one industry in the index or all industries in the index are somehow complementary (ie. a loss/gain in one will see a similar loss/gain in another)
[4] Most industry are related to Technology (Only 62 out of the 500 companies are in the Technology sector)
Using your example, if the Technology industry outperforms all other industry within a given period, Person A would enjoy a profit whereas Person B might walk away with a loss.
Market indices shouldn't be used as the benchmark for the true reflection of a company's performance/worth. Lockheed Martin is the key example, its one of the most desired stocks that has been growing steadily and pays one of the highest dividends, yet it underperforms the market.
A decision to invest in Microsoft needs to be compared against the opportunity cost: investing in an unbiased sample of companies (you can invest in the Russel 2000 if you want), for much less risk.
Taking a job to work at McDonalds is a bad decision when the alternative (picking a random job available to you, essentially) pays more. Even if you "get paid" while working at McDonalds, it wasn't a worthwhile decision.
(By the way, stocks are absolutely compared against the average market to see if they are a worthwhile decision. Why do you want to invest in an underperformer when you can invest randomly and do better? It's like testing a drug against a placebo.)
I'm guessing you don't own their stock. They have one of the best dividend payouts in the sector. MS in the last decade has been low risk and steady rewards.
Total returns are what matter. Stock appreciation plus dividends.
If the broader market returns 10%, you can't say, "But I got a 3% dividend, that's apples to oranges." In the end it's all part of the total return.
I'm not arguing that dividends don't matter - on the contrary they matter a lot. But a stock with low total returns over time isn't saved just because the dividend portion of that is high.
Total returns is calculated at the point of sale. How do you argue this and not cherry pick? For instance, as mentioned this stock is very low risk so if you look at the drop during the crashes, you'll notice that it doesn't fall nearly as hard as other riskier stocks (risk vs reward). For a rock solid stock (low risk large cap) that offers great dividends, it's really hard to beat MSFT.
There are 2 ways to look at it:
1) Look at total returns after the fact. Over the past 10-15 years, Microsoft has underperformed the indexes, even on a risk adjusted basis. (If you want to compare it to low vol stocks rather than tech, look at DFA's value fund) Generally high dividend stocks outperform low dividend stocks over the long haul, so this non-performance is even more striking.
2) You can make a judgment that in the future this will change. What's the basis of this, when most stock pickers are wrong as often as they are right?
What the hell is a computer platform market share?
Should Android and Windows be in the same category? Should Windows and Blackberry be in the same category? Is an Android device going to be loaded with thousands of dollars of software and hardware and used for CAD?
Why wouldn't it? Seriously, why wouldn't an Android device sometime in the future be loaded with thousands of dollars of software and hardware and be used for CAD? There is no reason to say that this will never happen.
But besides that, Windows also used to be used for loading tens of dollars of software and be used for email, word processing, surfing the web, etc. That use of Windows is shrinking. What's taking it? Android and iOS. So yes, this is all one big market. And nobody can say for certain whether that would eventually extend to the market of software that costs thousands of dollars per license either. Especially if software continues to move towards SaaS models.
You bring up a valid technical point, but it fails to capture the notion of platform. I think we both agree that Android could run desktop class software, hell you can probably x-forward and do it now.
When we see this graph I foam at the mouth, thinking that a Windows x86 computer and cell phone are on the same level. But is that how it being used? Is that how it is being used in 2005, is that how it is being used in 2012?
Ironically the recent spike in x86 Windows tablet sales (now priced at $200) might actually unite these form factors - under MS's terms.
My point is that these lines are rather arbitrary, and are today a poor indicator of computing market share weighted by margins - which was indisputably how MS makes it money. I wonder if they have to replace each-other or do they augment or compete on a different playing field. Although strongly agree that a disproportionate amount of investment in SF is going toward the Android side.
Settled for relevance would indicate they are currently not relevant which is a mindset only accepted in a few square miles on the planet. How different would the valley view Microsoft today had they been headquartered in SV instead of Redmond?
I don't think its in Google's strategic view to release any official WP apps. Doing that would mean they would have to accept WP as competition. Windows 8 (Desktop) store on the other hand has a handful of official Google apps.
Microsoft is hell-bent on market domination, it's just they're failing to capture emerging markets. Their attempt at creating tablets, smartphones, music players, etc have all flopped. Yet each attempt all have the traits of classic EEE.
Getting office on the iPad isn't an example of Microsoft fighting for relevance, it's an example of them ensuring market domination at the office.
>it's just they're failing to capture emerging markets
If anything MS is actually doing better in the emerging markets especially with Nokia smartphones.
>Their attempt at creating tablets, smartphones, music players, etc have all flopped.
What? Given the amount of Windows 8 devices being released, its nowhere close to being flopped. I wonder what your opinion would then be about Firefox and Ubuntu OS.
Sorry, I should have written 'new markets', not emerging markets.
While Windows 8 is successful, its surface range haven't grabbed significant marketshare from Apple/Android. Windows 8 in comparison to 7/XP has been a monumental failure however, forcing 8.1 to backtrack to a more classic desktop.
Internet Explorer 11 supports WebGL 1 (based on OpenGL ES 2 which itself is roughly OpenGL 2 minus v1 API). I read it will be available with Windows Phone 8.1. WebGL on Xbox would be great. (PS4 GUI for example is powered by WebGL.)
They enabled WebGL precisely because of this - they wanted to stay relevant. Their browser domination is long gone. DirectX however is still very dominant outside the browser, but it deteriorates pretty quickly. Valve is preparing a very serious blow for them with Steam Machines and recent push for Linux gaming. That, together with OpenGL everywhere on mobile outside MS systems will break DirectX domination for good.
I suspect parts of Redmond are still Windows uber alles, but, Microsoft has been doing non-Windows products for 30+ years.