In a note tonight, Goldman Sachs analysts paddle Microsoft’s ass for not living up to its expectations. They downgrade the firm to neutral, then say Microsoft needs to do the following to get back into Goldman’s good graces:
- A materially increased dividend beyond the recent 23% increase, moving Microsoft into the top 20 dividend-paying companies in the S&P 500 in terms of dividend yield. We believe this would open the door to a larger investor base and keep the company more diligent from a spending perspective.
- A coherent consumer strategy that could involve paring back investments and/or divesting more peripheral assets such as gaming.
- Market leadership in Cloud. Microsoft has a strong portfolio of enterprise data center assets and could become a leader in Cloud deployments, but the competitive environment remains highly in flux, with Microsoft still not a clear “winner,” in our view.
Oh, that’s all? Just a giant increase in the dividend, a coherent strategy in a segment of the market that has had Microsoft bolloxed for more than a decade, and leadership in a new segment dominated by nimbler startups? Pulling this off would be like Microsoft learning Geller-ian magic tricks, the equivalent of being able to bend spoons with its brain. [-]