For over a decade, Microsoft (MSFT) held its investors in a state of limbo. In its heyday in the 1990s, investing in Microsoft often felt as close as one could come to a "sure thing." Investors handed over their funds and then sat back and watched their returns roll in. Then, in 2000, the "sure thing" fell apart.
When we think of Microsoft, the first thing that likely comes to mind is the company's role as the leading developer of the operating systems of most personal computers. Microsoft Office is perhaps a close second, while Internet Explorer was likely the first Web browser to which most of us were ever introduced. If you've had any experience with these three, what would likely come to mind next would be the various frustrations we've had with one if not all, of them. This was particularly true with the release of its Vista operating system and Internet Explorer 6. Yet this company had become such a part of our everyday lives that it had been as difficult to imagine life without Microsoft as it was to think of life without the PC.
Of course, then came the tablet and the smartphone, neither of which initially ran Microsoft's operating systems, and Apple (AAPL) quickly stole the show. Many started to questions Microsoft's ability to adapt to this technological shift. Nevertheless, it wasn't for lack of trying. Microsoft created Zune as a rival for the iPod, Kin as its first "social networking" phone, and Windows Mobile as an attempt to compete with the iPhone. Over the years, however, Microsoft has failed to wow new investors, and the greatest buzz stirred by these innovations was how well they flopped -- that is, when they are remembered at all.
Over the past several years, however, Microsoft has made some huge strides in stepping up to the competition. Its latest attempt to compete in the smartphone market has been a resounding success. Three years after its debut, it is now the second most popular mobile platform in Latin America. Just one year ago it was at No. 4 in the region behind Android, iOS, and Blackberry OS (listed in order of popularity). Globally, it has also clawed its way from the fourth-place position to surpass Blackberry OS.
Microsoft also went out on a limb with the release of Windows 8. It faced tough criticism and the frustration of longtime PC users who were befuddled by the alien appearance of its latest operating system, which had been designed with touch-screen technology in mind. Microsoft, however, forced their hands. Now PC users are faced with the reality that, while they may delay the inevitable, they will have no choice but to adapt to this new landscape.
Investors are once again seeing the light. Shares of Microsoft are up 40.40% this year alone, having rallied from $26.45 at the close of last year to a new 52-week high of $38.22 this past week. In fact, the last time Microsoft closed above $38 was in April 2000.
This raises the question: With such a strong rally in Microsoft already, and given concerns of a larger market correction on the horizon, is it worth acquiring at these levels? In my opinion: yes.
Although Microsoft is still trailing behind Apple's iOS in the global mobile department, Apple will be the one now struggling to hold on to its No. 2 spot as Windows Phone continues to rise in popularity. Tablets may be on the rise vs. the PC among individual consumers, with an estimated 18% of workers also using an employer-owned tablet at work -- but it is estimated that approximately half of all PCs are still running on Windows XP. In other words, these companies -- who rely upon their PCs that run the older operating systems in their workplaces -- are facing upgrades to their own systems over the next several years.
Microsoft also has plenty of room to grow in the table department itself. Right now Apple is still the leader in the tablet wars. Why? Because Microsoft's tablets currently lack the vast library of apps and content available to Apple consumers. Expect this war to heat up soon, though, especially if Microsoft's new CEO has anything to do with it!
Among the finalists in the hunt for a new Microsoft chief is Stephen Elop, whose bold leadership moves have included a deal that made Microsoft Office's software available on Nokia's (NOK) then-current phones. After becoming Nokia's CEO in 2010, he then rejected the leading smartphone OS -- Google's (GOOG) Android -- and opted for the newly released Windows Phone platform.
While Microsoft stock does appear extended on the daily time frame after its run from September lows, on the monthly charts it is just getting off the ground.
By breeching the highs of its 13-year trading channel last week, eyes are once again returning to this long-forgotten gem. The main technical resistance left to tackle constitutes the stock's all-time highs from 1999. However, if Microsoft's new leadership does nothing other than keep it on its current path, these highs could easily just be a blip on the radar when viewed five years from now.