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Microsoft’s Strength in Difficult Market - Gates Unloads 20 Million Shares

September 17, 2013 | About:
Sally Jones

Sally Jones

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Reporting for 12 months ended June 30, 2013, Microsoft Corporation’s net income is down around $5 billion. According to the company, these financial results reflect “ongoing strength in enterprise offset by a challenging consumer PC market.” One of four U.S. companies with the highest AAA credit rating, Microsoft Corp. reported quarterly revenue of $19.90 billion for the quarter ended June 30, 2013, compared to $18.05 billion in the same period a year ago. Operating income, net income, and diluted earnings per share for the quarter were $6.07 billion, $4.97 billion, and $0.59 per share, according to a company press release.

Microsoft raised its dividend by 22% today and announced a $40 billion share repurchase program that will replace its current program expiring at the end of September, according to CNN. The company will pay a 3.4% dividend yield, compared to the Apple Inc. (AAPL) yield of 2.7%. Microsoft’s dividend yield is currently 2.80% with a dividend payout ratio of 34.5%.

Tracking MSFT share price to dividend yield since 1990:

1379439681319.png

Although Microsoft faces intense competition in every sector, the company revenue is up across the board. Microsoft’s Business Division revenue grew 14% for the fourth quarter and 3% for the full year; its Server & Tools revenue grew 9% for the fourth quarter and 9% for the full year, driven by double-digit percentage revenue growth in SQL Server and System Center.

Tracking share price, revenue and net income:

1379439557774.png

The company’s Windows Division revenue grew 6% for the fourth quarter and 5% for the full year, and Online Services Division revenue grew 9% for the fourth quarter and 12% for the full year. The company cited Bing’s organic U.S. search market share of 17.9% for the month of June 2013, was up 230 basis points from the prior year period. Microsoft’s Entertainment and Devices Division also grew 8% for the fourth quarter and 6% for the full year. During the quarter, transactional revenue within Xbox LIVE grew nearly 20%, according to a company press release.

“We continue to see strong demand for our enterprise products and services, with more and more customers making long-term commitments to the Microsoft platform,” said Kevin Turner, chief operating officer at Microsoft. “The growing adoption of our cloud services, including Office 365, Windows Azure and Dynamics CRM, continues to demonstrate our leadership position in the cloud.”

Here’s a look at the highlights of recent MSFT trades.

Microsoft Corporation (MSFT) – Yield 2.80%

Predictability: 3.5 Stars

Founded in 1975, Microsoft is the worldwide leader in software, services and solutions for computing devices used by individuals and businesses.

Up 5% over 12 months, Microsoft has a market cap of $273.23 billion, and trades at a P/E of 12.60 and a P/B of 3.50. The current share price is around $33.00.

Guru Action: 56 billionaire investors hold MSFT as of June 30, 2013. Three sold out in the same quarter.

Most notably, Microsoft insiders are very busy trading. So far in September, Guru Bill Gates (William H. Gates III), co-founder and chairman of Microsoft, has sold 20,000,000 shares at around $31.25 – $31.38 per share. After the trade, Gates holds 377,989,165 shares. These trades follow his April 2013 sells of around 20,000,000 shares at around $30.92 – $30.97 per share.

Outside of the company, the top Guru stakeholder is Dodge & Cox with 0.93% of shares outstanding, or 77,260,349 shares as of June 30, 2013, after the firm reduced its position by 1.03%. The firm sold 807,455 shares at an average price of $32.76 for a gain of 0.1% gain. Over a five-year history, Dodge & Cox has gained 23% on 79,068,504 shares bought at an average price of $26.65 per share. The firm gained 6% selling 1,808,155 shares at an average price of $30.97 per share.

PRIMECAP Management holds 63,165,491 shares or 0.76% of shares outstanding. The firm increased its position by 2.99% in second quarter, buying 1,836,200 shares at an average price of $32.76 for a gain of 0.1%. Across a five-year history, PRIMCAP has gained 20% on 27,427,096 shares bought at an average price of $27.32 per share. The firm gained 15% selling 4,651,268 shares at an average price of $28.60 per share.

Relatively new to MSFT, Jeff Uben has held for two quarters. He upped his sake by 73.15% in the second quarter, buying 24,396,487 shares at an average price of $32.76 per share for a 0.1% gain. In the previous quarter, his new buy of 33,353,513 shares bought at an average price of $27.69 per share made a gain of 18.5%

David Einhorn and Paul Tudor Jones sold out their MSFT holdings in the same quarter, getting out with a 0.1% gain after five years of gains.

Paul Singer held MSFT for two quarters. He made 18.5% on his new buy of 100,000 shares bought an average price of $27.69 per share in the first quarter of 2013. When he sold out 100,000 shares at an average price of $32.76 per share in the second quarter of 2013, he made a gain of 0.1%.

Check here for numerous billionaires trading MSFT.

Here’s the portfolio for the Bill & Melinda Gates Foundation Trust.





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About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

Rating: 3.8/5 (4 votes)

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