Microsoft Corporation (MSFT)’s Windows 8 a Success?

Let’s not forget Dell

Dell Inc. (NASDAQ:DELL) has been busy diversifying outside of the traditional desktop and laptop business.

Source: Dell

Going forward, the company is likely to grow its software and service business to more than 50% of revenues. This will reduce Dell Inc. (NASDAQ:DELL)’s dependence on Laptop and Desktops for revenue growth. Because of this, the company seems to be on solid footing in terms of growth. The company may have further upside due to Microsoft Corporation (NASDAQ:MSFT) ending its support for Windows XP in 2014.

But ignoring the core fundamentals of the business, Carl Icahn has been stirring up a lot of controversy among shareholders and the board. Icahn believes that the takeover bid at $13.65 by Michael Dell is just too low of a price. Because of this, Icahn has put together an alternative deal that may be more beneficial to shareholders.

The basic assumption is that if Dell Inc. (NASDAQ:DELL) was to issue a special dividend worth $11.86 per share, the value of the dividend plus the open market price of the stock after issuing the dividend will be greater than the $13.65 offered by Dell. I estimate that investors could recoup $22 in value after a 90% dividend yield, assuming the price of the stock declines by 30% from the time it issues the dividend.

Conclusion

I believe that the Windows 8 operating system will continue to gain market share going forward. There will be pent-up demand for Windows 8 once support for Windows XP ends in 2014. Investors may find further upside by investing into either Hewlett-Packard or Dell. Hewlett-Packard has a short-term catalyst of cost-cutting which could lead to significant earnings surprises. Dell, on the other hand, may offer its shareholder an 80 to 90% dividend yield which could generate $22 in value per share, which is substantially higher than the $13.65 proposed by Dell.

The article Microsoft’s Windows 8 a Success? originally appeared on Fool.com and is written by Alexander Cho.

Alexander Cho has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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