Things Aren’t so Bad at Microsoft Corporation (MSFT)

Microsoft offers solutions that are suitable for small and mid-sized businesses, which gives it an edge over Oracle Corporation (NASDAQ:ORCL), whose solutions are pricier. Global IT spending is muted due to unfavorable economic situations, and customers are trying to save every penny. Oracle’s earnings report in the second half of June showed major softness in hardware sales, as well as problems on the software front. The stock was punished and became attractive. Since then, it has rebounded, but is still down 4% year-to-date. The stock trades at 10.1 forward P/E, but lacks growth catalysts. The possible upside looks equal to the possible downside at current prices.

Office 365 is also gaining momentum. There are currently more than one million Office 365 Home Premium subscribers. I think that the subscription model could pay off, as it provides a more stable revenue stream and helps fight piracy.

Bottom line

If put on scales, do bad factors outweigh positive ones? I think that the sell-off was overdone. At current prices, Microsoft Corporation (NASDAQ:MSFT) yields 2.93% and should attract income hunters. Surface RT is not a major part of the business. Perhaps, Microsoft would even say goodbye to tablets at some point. The enterprise segment is doing well. The subscription model is going to pay off in the future, although it pressures the bottom line in the near term.

Apple Inc. (NASDAQ:AAPL) continues to be in a down trend. Only new products would be able to lift the stock again. Despite the fact that Apple yields 2.87%, I would not recommend it as an income source, as there could be significant volatility in the stock.

Oracle Corporation (NASDAQ:ORCL) lacks momentum. The company continues to be pressured by the drop in hardware and worldwide cuts in IT spending. The stock seems fairly valued at the moment.

Vladimir Zernov has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Oracle Corporation (NASDAQ:ORCL).

The article Things Aren’t so Bad at Microsoft originally appeared on Fool.com.

Vladimir 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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