Microsoft results. The stock is dirt cheap. Why?

But tech stocks were the focus afterhours, results from Microsoft. Which I thought looked very good, considering that people have been talking about a struggling PC business. I remember seeing an interview with Michael Dell from err.... Dell Inc. last week who suggested that personal computers were not where it was at for him and his company. And that personal computers were less than ten percent of all of the hardware market, which tops three trillion Dollars worth of annual sales.

So whilst Microsoft might well be perceived as the "Windows" operating system, there are many divisions to the business. From Google Finance: "Microsoft Corporation is engaged in developing, licensing and supporting a range of software products and services. It also designs and sells hardware, and delivers online advertising to the customers. It has five segments: Windows & Windows Live Division (Windows Division), Server and Tools, Online Services Division (OSD), Microsoft Business Division (MBD), and Entertainment and Devices Division (EDD)."

So how did each of those businesses do? First, as the headline suggests, this is and was a record quarter -> Microsoft Reports Record First-Quarter Results. Annualise this quarter and I get to 272 US cents worth of earnings and 80 cents of dividends. And where does the share price trade? In the pre market, the stock is down at 26.86 Dollars. Less than ten times forward and a yield of three percent, certainly Mr. Market is saying that the company is going to struggle from here. The Windows operating systems on the mobile phones is going to have to work hard against the likes of the Apple iOS and especially the android operating system. Again, an enormous amount of cash on hand, nearly 57 and a half billion Dollars, which is 25 percent of their market cap. Wow. So take that out, and then basically you have earnings of 270 odd US cents on a share price less cash of 20 Dollars a share. You are looking at valuations of less than seven and a half times earnings!!!

Surely the future for Microsoft is not that bad that the market must give them such a poor rating. Perhaps only a re-rating will come with a steadily improving dividend policy. Their server business is growing nicely, so are there entertainment businesses, that could be one of the future growth areas for them. OK, pretty much not the growth business that it once was (they will argue otherwise) but I suspect that by holding Mr. Softy over the next half a decade you will be rewarded for having hung on there. If only the market would not view them as a Utility type company.