Microsoft beat, XBox becoming more important.

Microsoft. Strangely you would think that this company is old tech, even though Mr. Nerdy (my daughters call me that!) Bill Gates only founded this company nearly 37 years ago. I remember doing some very low key basic programming and visual basic, let me say I was pretty bad at it, but interested. Not interested enough clearly. I was watching a Bloomberg round up of second quarter sales, and for the first time sales in Windows products fell, with devices (read Xbox and Kinect) and servers (enterprise) leading the charge with double digit sales.

The second quarter in their 2012 financial year sees the company report record revenues. That is right. Record revenues of 20.9 billion Dollars, find the press release here -> Earnings Release FY12 Q2. As they say "Strong business demand and holiday sales drive record revenue and EPS." However, the company expects PC sales to continue to be weak, as of September last year, competitor Apple had sold a whopping 40 million iPads already. Wow. And Windows 8 is coming sometime soon, in the presentation of the results () the suggestion was that the Beta version would be released in February. Next week.

Operating expenses jumped 1.1 billion Dollars when compared to the comparative quarter, a little more than total (record) revenue. Net income for the quarter was basically flat. Diluted EPS clocked 78 cents, the dividend declared was a very generous 20 cents, which is quite a big jump when compared to the quarterly div of 16 cents. I honestly think that they are moving in the right direction, in-house entertainment is going to be bigger and bigger, with console sales having exploded 25 percent higher, the Xbox and Kinect is really well placed. 40 million XLive subscribers now should continue to grow as bandwidth speeds catch up in the developing world. I mean, come on, who does not want to control Messi, Ronaldo, Rooney, van Persie or Drogba? Amongst scores of others of course, excuse me if I left out your favourite footballer.

There are many concerns about their business and the future of the personal computer as part of our lives. They have cash on hand of over 50 billion Dollars. At the current market cap of a little less than 250 billion Dollars that is 20 percent cash only. The stock price at that market capitalisation is 29.71 Dollars, a lofty move north of 5.65 percent. Even at that price the market affords an only 10.75 times earnings. Sad but true. And a dividend yield of 2.7 percent. Oh, and wait for it, a triple A credit rating, for what it is worth. Perhaps cheap for a reason. I would say that the company has the necessary skills to reinvent themselves and a proven track record. Again, this is not a company amongst our core holding of tech stocks, but it could easily be. Like many folks out there who say that Microsoft are stuck in a cul-de-sac with their core offering, this might well be the case I am afraid. I am sure that they will come out fighting strong though.

The decade (or generational) low for the stock was when the market bottomed out in March 2009, the stock was half of where it is now. But on an out and out valuations basis, this is perhaps the cheapest the stock has ever been. I guess market participants are worried about all of the above. I am torn on this one, but think it is too cheap to pass. Perhaps the utility stock of the future, there is a certain irony in that.