Somebody pinch me

I haven't posted for a while because, frankly, there's been little of interest and I'm more preoccupied with Christmas - oops, I mean the holiday (we must be politically correct after all). Yes, there was the comical reiteration that Zune sales were going as planned - while simultaneously speculating about increasing the marketing expenditure, more bad news on the search front, another [yawn] partnership announcement, more fallout from the Novell deal, and of course more legal and product bug problems (too many to list there). But that's mostly business as usual and hardly noteworthy.

What is new, is that after breaking the uptrend and seemingly poised for another trip to the basement, MSFT stock suddenly reversed, and managed to close above $30 - something it hasn't done in 2 years. In fact, it's currently threatening to take out the high on what is now a 4-year old trading range. Of course, before we get too excited, we should note that this didn't happen in a vacuum. Getting here, first took a trip to the bottom of that 4-year range (following management's guidance screwup), and then an additional $40B commitment of [shareholder] cash to a tender (which subsequently failed) and an increased buyback. Still, if you held through all that and ignore the implications that MSFT can't buy its way out of trouble forever, you're currently poised to receive an S&P-like performance for the first time in 4 years (ignoring, of course, that you took far more risk, incurred more volatility, and made less in dividends to get it):

Speaking of dividends, I see that management has decided to reward long-suffering shareholders by not increasing the dividend at all. I've posted before on the unmitigated joke that is MSFT's dividend policy, but that's even more true given the recent runup which has dropped the yield to just 1.33%. It's hard to decide what to make of the Board's decision to leave the dividend alone when it's under-market and the stock has [still] badly underperformed the S&P since '00 - to the tune of some 50% . If you want to be charitable, I guess you could say that a) they believe that money spent on buybacks is more effective (difficult to support since they clearly have enough cash to do both), or b)they're bullish about the year ahead and think that the stock can continue its recent stronger performance w/o further assistance. On the less-charitable - but likely more realistic - side, you could conclude that a) they think the stock has gotten ahead of itself and will drop, thereby increasing the yield, b) they're momentarily giddy over performing at the market for once (and haven't figured out that it required committing $40B of additional shareholder cash and even then, including dividends, you'd still have been better off holding the SPY's vs MSFT), or c) they couldn't care less and don't intend to ever provide even a market-average dividend (consistent with the track record since its inception).

Meanwhile, MSFT's Dare Obasanjo is openly blogging that he used the $30 breach to bail on all his options. He's entitled, of course (assuming, that is, that as an insider - albeit a non-executive one - there's no SEC restriction about doing so publicly), but it doesn't say much for his optimism in the company's future - as a commenter on his post noted. Then again, neither does the level of [executive] insider selling generally. It seems that many, especially in MSFT's leadership, are happy to simply give up on ever driving value for shareholders. Instead, they seem content to run the company for their own personal enrichment, while throwing shareholders just enough occasional bones to keep them at bay. It's almost like they got used to a certain lifestyle back in the 90's - when the company used to perform for shareholders - and now think they're entitled to that for life. If so, wake up. To quote a Neil Diamond song (why, I'm not sure, but it popped into my head), "Used-to-bes don't count anymore..They just lay on the floor...Till we sweep them away.". Translation: Stop living off your former glory - that's in the increasingly distant past. Either perform now for current shareholders or make room for a leadership team who can/will. The S&P index is the "average" of a broad cross-section of companies. If you can't even perform at that average more than once every 4 years (I.e. are consistently "below-average"), you have no business cashing multi-million dollar pay packages and splitting $1B bonuses.