Microsoft (MSFT): Why A Rally?

Print Email

Microsoft (MSFT) has moved from $28.65 to $29.52 over the last day-and-a-half. But, the move is largely on "soft" news, which means the stock may not stay up for long.

The company has released "Halo 3". With 1.5 million pre-ordered games at about $70 each, the revenue is not much in the scheme of things. It is not unclear whether the new product will substantially lift Xbox 360 sales. But, the device operation at MSFT losese hundreds of million of dollars a year, so making a dent would require quite a surge in units sold.

The other piece of news is more a rumor. Microsoft may buy 5% of Facebook for $500 million. Is that a good deal? It is almost impossible to tell. If Microsoft takes over the sale of all advertising on the social network site, it may make Redmond’s ad network more powerful. But, owning 5% of the company does not give Microsoft anything it might not get in a strategic relationship that involves no money. The market would probably rather see MSFT spend the $10 billion and buy Facebook outright.

Not much news, really. Not enough for a rally.

Douglas A. McIntyre