Wednesday, October 13, 2010

Microsoft: What Wall Street Is Overlooking, Part 1

By Eric Jackson10/13/10 - 11:30 AM EDT

NEW YORK (TheStreet ) -- Microsoft(MSFT_) continues to be a much maligned stock on Wall Street, even though it's quietly become a large holding by many hedge funds over the past few months, including John Burbank's Passport Capital and Lee Ainsle's Maverick Capital. Both mentioned the stock in their Value Investing Conference talk in New York recently.

In an interview with TheStreet, Bill Koefoed, Microsoft GM of Investor Relations, talks about what he believes investors are missing in their analysis of the company. Here's Part 1 of the interview.

Eric Jackson: Most people following the company get the Windows 7 and Office upgrade cycle going on. But do you still think they're missing part of that story?

Bill Koefoed: There is a lot of strength across our businesses, including Windows and Office, and that's where people tend to gravitate in terms of the story. We have eight main business focus areas that drive our future, but I think as people think about Microsoft, sometimes they think there are just a couple of focus areas, Windows and Office. We have been investing in eight focus areas.

The first is really Xbox and TV. We feel great about the future of the Xbox business as this year we are going to have just a phenomenal game lineup. We have 25 million members on Xbox LIVE, which has been growing pretty substantially.

In addition to the subscription component of Xbox LIVE, we also have the ability to offer transactional items, whether it's a relationship with Netflix(NFLX_) that you could buy, things like map packs or other accessories and communications and collaboration items.

Xbox LIVE is very exciting and we feel it has an industry-leading capability. You will continue to see us develop that capability as we add Kinect and we can extend the Xbox console to more of a casual gamer or even people that want to use the Xbox for entertainment purposes. And we think there are a lot of great applications for that as we go forward.

The next area is Windows Phone. We launched Windows Phone 7 recently and the reviews have been exciting. We are committed to this market and see Windows Phone 7 as a way to bring the entire breadth of Microsoft assets to a mobile experience.

The next area is Bing. We continue to see phenomenal opportunities around the search business. It continues to be one that we think has very attractive economics. It tends to be one that has a margin profile that we really like and one that tends to be a software problem to solve. We feel like we've got the best software team on the planet. So we're very enthusiastic about Bing and continue to be.


[** This post is an excerpt of the full article, which is available on by clicking here. Free Site.**]

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