Microsoft’s Stature on Wall Street Surges
As Microsoft wraps up another fiscal year, it appears it was a good one with significant changes that'll shape the company for years to come. Despite the tough choices that CEO Satya Nadella last week said that Microsoft must make, the company is also getting respect for the moves he's made in Silicon Valley over the past year as well as another important place: Wall Street.
Microsoft has risen sharply among the 100 most respected companies by institutional investors, though it still has a long way to go before coming close to Apple, which once again topped the Barron's annual ranking. While Google dropped one notch to No 4 this year, the two were the only tech companies in the top 10. Amazon.com, which still scored better than Microsoft, saw its ranking drop this year to 17 from 7 last year, while Intel at 25 dropped a bit from 21.
Last year, Microsoft was closer to the bottom of the list at 62 but has jumped to 27. Despite that impressive rise in standing among investors, the question is: does Microsoft have much to show for itself? Its stock today hovering just below $45 per share is up 8%, year-over-year. If you use Apple as the metric, Microsoft's growth was impressive but not earth-shattering. Apple shares have jumped 40% year-over-year. On the other hand, while investors may respect Google more than Microsoft, they haven't put their money where their mouths are when it comes to the search giant. Google shares are down 9% over the past 12 months. Some other notables in the tech market: Cisco is up 12%, Oracle is flat, IBM is down 10% and VMware shares are down 12%. The S&P 500 is up just under 6% during the past year. The tech-heavy Nasdaq 100 index has jumped up 14%.
When you're in that plus or minus 10% zone of course, valuations can swing sharply on major news or even the most speculative of rumors. So is Apple the only one to enjoy a meteoric rise in value? Well, Amazon is up 31% (putting aside it's primarily an online retail business, many believe Amazon Web Services is fueling its growth). Salesforce.com is up about 20%, buoyed by recent speculation that Microsoft made an offer to acquire the huge SaaS provider. According to reports, Salesforce.com has held out for much more and many believe such a combination would wreak havoc on both companies and their customers.
In addition to cultural differences, Barron's cover story this week, examined another well-known trend in Silicon Valley, the Pacific Northwest and other technology providers that has many wondering whether we're in another tech bubble.
Salesforce.com is among a number of companies that use non-GAAP reporting to hide the expenses of huge stock-based compensation that critics say masks the true earnings of a company. Among others who use non-GAAP reporting in a big way to pay large amounts of stock to executives are Amazon, Google, Facebook, Twitter and Qualcomm, Barrons noted. Microsoft, Apple and Intel eschew such compensation. That would certainly complicate Microsoft absorbing Salesforce.
Many IT pros and developers make big investments in these companies, whether or not they hold shares. If Wall Street is taking more notice -- and interest --that may have all types of consequences in Microsoft's next fiscal year and beyond.
Posted by Jeffrey Schwartz on 06/29/2015 at 12:19 PM