Feeds

Goldman downgrades Microsoft stock to 'neutral'

Dear Ballmer, is cloud computing nature or nurture? You decide

Choosing a cloud hosting partner with confidence

Pre-packaged software giant Microsoft saw its stock rating lowered to neutral by Goldman Sachs today, in response to the company’s sluggish entry into the tablet and smartphone market.

The brokerage’s concerns reflected those of Microsoft’s own board, which last week put a cap on CEO Steve Ballmer’s bonus payout because of his failure to take on Apple and other rivals in the mobile and “form factor” space.

Goldman said it now expected Redmond’s core business to be affected by a longer PC refresh cycle. The sting in the tail being that Microsoft, as Ballmer has recently – finally – acknowledged, can no longer rely on those products alone. Diversify or die is, perhaps, the simplistic message.

Microsoft is committing 70 per cent of its 2010 R&D $9.5bn funds to the cloud in a clear signal to investors that the vendor is now “all-in” on skyward-inspired tech. Furthermore, MS is launching its Windows Mobile 7 platform on 11 October.

But none of that has been enough to stop Goldman slapping the back of Microsoft’s legs today, and Wall Street followed with a big fat groan.

In order to win back a gold star, Microsoft needs to divest its non-core businesses, such as gaming. At the same time the firm needs to push up its dividend to grab a bigger investor base, said the brokerage.

Redmond did exactly that in September, upping it by three cents, or 23 per cent, in a move to placate investors who've struggled to see much return on the stock in recent months. But that move clearly didn’t satisfy Goldman.

The brokerage slashed Microsoft’s price target to $28 from $32 and added that Ballmer’s crew needed to be a market leader in cloud computing where it’s currently not “a clear ‘winner’”, despite its worldwide data centre muscle and the CEO’s newfound affectation for the tech.

Shares in Microsoft fell to $23.91 on Nasdaq, after the downgrade.

Meanwhile, Ballmer is overseas in Europe bigging up Microsoft’s cloud computing ambitions in what is increasingly starting to feel like a (after)thought rather than market leadership role.

All Ballmer needs now is for ructions to develop among disgruntled staff, who might well be listening closely to what such a high-profile downgrade really means for the company. ®

Remote control for virtualized desktops

Whitepapers

Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
Getting started with customer-focused identity management
Learn why identity is a fundamental requirement to digital growth, and how without it there is no way to identify and engage customers in a meaningful way.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Reducing the cost and complexity of web vulnerability management
How using vulnerability assessments to identify exploitable weaknesses and take corrective action can reduce the risk of hackers finding your site and attacking it.
Top 5 reasons to deploy VMware with Tegile
Data demand and the rise of virtualization is challenging IT teams to deliver storage performance, scalability and capacity that can keep up, while maximizing efficiency.