Microsoft Value

Early this week I dumped Motorola and bought into Microsoft. Here are some reasons why I sold MOT:

1) MOT's dividend is stingy. Dividends are an important part of my mortgage portfolio.
2) MOT's new flagship phone - the ROKR - has been poorly received by the press.
3) Having risen 15% since I bought the share MOT is less obviously good value now.
4) The share price has not gone anywhere in the last 10 years.

And some reasons why I like MSFT:

1) Yield is over 1%
2) Forward PE is under 17 - lower than Coca Cola but with much faster growth
3) MSFT has tons of cash
4) Threats from Linux and Google are fully discounted in and more
5) Share price downside potential is minimal as this stock is already cheap

Microsoft has its problems but one day the market is going to decide it likes this stock again and the price will shoot above 30. The problem is that most of its revenue comes from mature businesses - the Office and Windows products. Growth is slow here but they are a reliable cash cow. The server software market is growing faster and if MSFT can start making traction with its MSN business and with Vista (the next Windows version) out next year 2006 could be the year that the shares start performing again.