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Archive for February, 2011|Monthly archive page

Tiny Company Called Microsoft Your Best ’11 Tech Play

In Growth and Business Strategy, Microsoft on February 19, 2011 at 4:42 pm

By James Altucher

My top pick for 2011 is a tech stock. That may not surprise you considering the big run by technology companies in the second half of 2010. But what may surprise you is what tech stock I’m throwing my weight behind: A tiny company called Microsoft (NASDAQ: MSFT).

Admittedly, Microsoft hasn’t given investors a lot to be happy about lately. MSFT stock has been kicked to the curb, down about -8% this year while the broader market has gained about +12%. If you’re a momentum investors this may turn you off, but I believe that the time is right for the rotation of capital back into this old standard.

Why? Here are some of the biggest reasons:

Stock Buyback Plan: Microsoft is currently working on a $40 billion stock repurchase, with $10 billion of that happening this year. That’s a lot of shareholder value.

Microsoft Flush With Cash: Though MSFT is often only mentioned derisively in the same sentence with Apple Inc. (NASDAQ: AAPL) and Google Inc. (NASDAQ: GOOG), one thing it shares with the two tech powerhouses is a war chest brimming with cash. Microsoft has $30 billion in the bank – and that’s even after paying a decent dividend of 2.3%, something neither Google or Apple offer right now.

Bargain Valuation: Microsoft trades for less than 8 times next year’s earnings (when you back out cash). Compare that to the S&P 500 which trades for about 13 times next year’s earnings. That would be impressive enough, but the icing on the cake is that MSFT earnings will grow twice as fast as the S&P earnings over the next five years.

Predictable Revenue: Much of MSFT’s revenues have shifted to subscription revenues making their earnings very predictable. The company is no longer as reliant on flashy software launches and one-shot sales.

Kinect for Xbox: The Kinect video game controller is is bigger than people think. And that’s saying something, considering the new gadget topped 2.5 million units sold at the end of November after less than a month on the market! Sales of the motion controller will top $500 million next year and $5 billion over the next five years. What’s more, applications will be created for it with very high margins.

Emerging Market IT Sales: The developing world is opening up its wallet when it comes to corporate IT. Though it may not be flashy, Windows remains the gold standard for computer OS software in the workplace so MSFT stock will be the prime beneficiary of this emerging market boom. Followed closely by fellow corporate IT powerhouses Cisco Systems (NASDAQ: CSCO) and Intel (NASDAQ: INTC), of course.

Twitter Restricts Use Of Its API, Could It Charge Next?

In Social Media, Social Viewing, Twitter on February 11, 2011 at 4:31 pm

Twitter will stop whitelisting applications to its API. What does that mean in English?

Developers can build applications on top of Twitter, like TweetDeck or Klout, by using its API to pull in its data. Some apps take in a lot of data, and up until now Twitter would allow them to be “whitelisted” to use the API more intensively. Now they’ve announced to developers that they will “no longer grant whitelisting requests.” Apps that are already whitelisted will keep their privileges, but if you were waiting until today to apply, tough luck. (Via Regular Geek)

Twitter says if you’re unhappy about it you should try to work harder to make do with the new limitations.

Why could that be? (Bear in mind we’re just speculating here.)

They’re having problems scaling so they want to cool down the API for a while. Most of the activity on Twitter is via the API, since most people use Twitter through apps, whether it’s Twitter’s own apps or third-party apps. Twitter hasn’t said that’s the reason, but Twitter’s scaling difficulties are legendary and this might be the reason. In which case, the move could be temporary.

Twitter has a big enough developer ecosystem now, thank you very much, so it’s going to stop supporting the rest. That’s what Regular Geek thinks, writing they’ve “essentially … decided that they have had enough support from the small developer.” We’re doubtful that’s the explanation — platforms like Twitter are always in competition with other platforms for developer support. And with oodles of cash in its coffers, Twitter can afford to keep supporting developers.

Maybe Twitter plans to charge for its API? That’s always been rumored to be a future business model for Twitter. Right now they’re focused on advertising, but the first time they made money was by charging Google and Microsoft for access to its “firehose”, meaning all of the tweets in real time, and they still do that. As companies like TweetDeck are starting to build a real business, maybe Twitter wants to charge for heavier access to its API.

Read more: http://www.businessinsider.com/twitter-restricts-use-of-its-api-could-it-charge-next-2011-2#ixzz1DfWPE77F