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Microsoft Pri0

Welcome to Microsoft Pri0: That's Microspeak for top priority, and that's the news and observations you'll find here from Seattle Times technology reporter Matt Day.

September 21, 2006 at 9:35 AM

MSFT momentum building?

Microsoft employees gathered right now at Safeco Field for the company’s annual meeting can probably find something to smile at despite the gloomy weather.

Since its June 13 nadir at $21.51 a share, Microsoft’s stock has climbed $5.56, or 25.8 percent, to close Wednesday at $27.07. MSFT was backing off a little in early afternoon trading today, but has finally returned to where it was trading in late April, before management surprised Wall Street with news of an additional multi-billion, long-term investment that sent shares crashing.

On top of the recent gains are at least two positive financial analyst reports on the company in the last 24 hours:

Goldman Sachs’ Rick Sherlund this morning reiterated his favorable take on the company with a note about the broader software industry that was also bullish on Adobe, Oracle and SAP. He wrote this about Microsoft’s big product launches due in early 2007: “We expect Windows Vista to generate $1.0 billion in incremental upgrade revenues and about $800 million in increased revenues due to a mix shift to premium priced products in the first twelve months.”

Sherlund has a $30 price target on the stock.

Sid Parakh, analyst at McAdams Wright Ragen, published a 28-page report on the company. He expects the strength of Microsoft’s new product cycle to allay investor concerns about competition from the likes of Google and Apple: “With several new product releases scheduled over the next few quarters, we believe that the timely and successful launch of these products should have a positive impact on revenue growth in FY07 (June, 2007) and FY08 (June, 2008), helping reinvigorate investor optimism on MSFT.”

Parakh has a $31 price target on the stock.

Of course, both analysts identified risks, including that the current stock price may reflect positive expectations about the product cycle and that Microsoft’s longer-term challenges around competition and innovation are plentiful.

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