Microsoft Corporation (MSFT): Here’s Why You Might Want To Avoid It

What does matter are the products and services that comprise the backbone of Microsoft Corporation (NASDAQ:MSFT)’s business. Microsoft has three core segments which in total comprised 83% of the company’s fiscal 2012 revenue: Microsoft Business Division; Servers and Tools; and Windows & Windows Live Division. These three divisions dwarf the Entertainment and Devices numbers.

In short, if you’re buying Microsoft stock, you aren’t buying the Xbox business. You’re buying Windows, Office, and the company’s server operations, and those are the segments you need to pay attention to going forward.

Focus your video game excitement on the right stock

If you’re truly interested in profiting from the next generation of video game consoles, you’d be better served considering specialty retailer GameStop Corp. (NYSE:GME). GameStop not only sells new video game hardware and software, but also conducts a used-game and hardware trade-in business that is extremely profitable for the company.

If the new generation of consoles really matters to any one company, it’s GameStop and not Microsoft. In addition, GameStop Corp. (NYSE:GME) has recently begun a strong commitment to rewarding its shareholders with a generous dividend policy. Since instituting a $0.15 quarterly dividend in fall 2012, GameStop has bumped up its dividend twice. The annualized payout of $1.10 per share amounts to a yield of roughly 3.2% at recent prices, which exceeds Microsoft’s current dividend yield.

The new generation of consoles, games, and accessories, plus the flurry of used-game trade-ins will provide just the catalysts needed to propel GameStop Corp. (NYSE:GME) in the future. While Microsoft is a highly profitable company, investors specifically interested in capitalizing on the next generation of consoles would be well advised to consider GameStop instead.

The article To Capitalize on the Next Xbox, Don’t Buy Microsoft originally appeared on Fool.com and is written by Robert Ciura.

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