Microsoft could control over 11 percent of the smartphone market by next year, according to some analysts, and 20 percent by 2015. In an attempt to reverse disappointing sales for its Windows 7.5 Phones, Microsoft is heavily targeting retailers, manufacturers, and mobile operators to increase interest in its models. Samsung, HTC Corp., and Nokia are expected to shift sales towards Microsoft Windows 7.5 in the near future.
With lots of cash on the balance sheet, and substantial amounts of free cash flow being generated on a monthly basis, Microsoft can afford to provide incentives and increase marketing efforts to boost sales. Much of the extra money being spent will probably go towards encouraging retail staff to push the phones on new and existing customers. Margins and profits on Apple phones are simply too high for Apple, and manufacturers and mobile operators are eagerly hoping to unlock their stranglehold on the market. Microsoft is providing an excellent opportunity for them to do so.
Nokia alone has more than 6,000 outlets, and it has already announced an exclusive deal with Microsoft for its smartphones after shelving plans for its own operating system. In the United States, many models are expected to cost less than $100, significantly less than phones provided by market leader Apple.
With the recent success of Windows 7, and an increased focus on tablets and smartphones at the company in the coming years, Microsoft shares are going to start looking very cheap. Currently selling from $25-$27, the stock is at similar levels to a decade ago. Investors who buy Microsoft are paid to wait by collecting a dividend of about 2.4%, and the downside risk at this point is very minimal.
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