This is anecdotal, not empirical, but the two smartest value-oriented investors writing blogs just simultaneously threw in the towel on Microsoft ($MSFT). In both cases, the trigger was the new Windows 8 operating system. The techies seemed to have known for awhile that 8 would be a letdown, it is well documented throughout the tech blogosphere. But now that dissatisfaction is making its way through the investing community.
I sang love serenades to Microsoft in the December issue, but a few weeks ago we sold our shares of Microsoft. Because we believe the stock is undervalued, that decision was not easy. What changed? A very important part of my thesis was the success of Windows 8, an operating system that Microsoft made for both PCs and tablets. When I saw Windows 8 demonstrated in early 2011, it looked like a very innovative, un-Microsoft-like product. Windows 8 was very important for Microsoft’s response to Apple’s iPad — a tablet that was deservingly stealing market share from low-end laptops. Windows 8 was supposed to take Microsoft to the next level, leapfrogging Apple and Google.
A few months ago Microsoft released the public Windows 8 beta, and I tested it out. To my shock, I found it to be a very confusing product. The interface was slick and visually very appealing, but I simply could not figure out how to use it...
And then last night I saw John Hempton, legendary blogger and hedge fund manager at Bronte Capital, say that he had also sold out of Microsoft because of the new OS:
Seldom have I looked at something that is a major long in the portfolio, changed my mind, sold the entire position and continued selling to go short (albeit in a small way).
I just did that on Microsoft. The immediate trigger was Windows 8 - but the thinking has been longer and harder than that.
There are important points made in both articles, I highly suggest you read them - even if you disagree.