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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.

July 28, 2011 at 8:39 AM

Answering your Q: Why Microsoft’s stock is flat

It’s my last week covering Microsoft and I am answering reader questions in the Microsoft Pri0 blog all week. You can submit your by scrolling down to the bottom of this post. Thursday is your last day to send me questions.

Q: Why hasn’t Microsoft stock responded to any of their successes? -Tori, Bellevue

A: In the past two years, the stock has gone from around $23 to about $27 per share this week. It crossed $30 briefly. In the past 10 years, it has hovered around the same price even as the company increased sales and profits.

Microsoft’s stock is trading cheaply relative to other companies when you look at its price to earnings ratio, also known as P/E ratio. The P/E ratio on Thursday for Microsoft stock is 11.09, which means the stock trades for 11.09 times its earnings. IBM trades for 14.86 times its earnings. Google trades for 23.89 its earnings.

The stock market cares about success with consumers right now, which means it values companies that makes tablets and smartphones. Microsoft does not have a strong track record with either.

This is what Gleacher & Co. analyst Yun Kim said, “This is completely a sentiment-driven stock. They just have to show they can beat the overhang the investors have put on them — that this is a post-PC [era], and they don’t have a product for some of these emerging form factors that are eating away at its monopoly in PCs.”

Kim believes the next bump will come when Microsoft shows and sells tablets running the Windows 8 operating system.

The simple answer on why Microsoft stock isn’t going up? You all! If more people buy the stock, the price goes up. If more of you sell it, the stock price goes down. If you’re evenly split, the price stays the same.

I do not own Microsoft stock. But here is what I recommend shareholders tell themselves in this video below. (Video courtesy of Youtube user Philkav1989.)

[do action=”custom_iframe” url=”https://spreadsheets.google.com/spreadsheet/embeddedform?formkey=dFpoU2t0YTJ5WnZKRHdtZ2tVNHVSa0E6MQ” width=”600″ height=”489″ frameborder=”0″ marginheight=”0″ marginwidth=”0″]Loading…[/do]

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