Is This the Catalyst Microsoft Investors Have Been Awaiting?

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Microsoft Corp. (NASDAQ:MSFT) has not exactly been the most exciting stock in the market over the past few years. Since 2001, shares have mostly been frozen between $25 and $30. Other tech bellwethers such as Apple Inc. (NASDAQ:AAPL) have captured interest with new and more innovative products than Microsoft. However, a new device recently unveiled by the Windows maker could provide a much needed boost to shares.

On June 18, Microsoft announced it is tapping into the tablet PC market with Surface. It is the first computer the software giant has ever made and will come in two versions. One version will run on Windows RT, while the other will be powered by Windows 8. The Windows RT Surface is an obvious reply to the iPad. It has almost identical dimensions to Apple’s tablet and will “be priced like comparable tablets,” according to Windows Chief Steve Sinofsky. Meanwhile, the Windows 8 version is more about enterprise, as it is expected to cost a significant amount more than the majority of iPads.

Although Microsoft failed with the Zune music player and Kin smartphone, investors cheered the company’s latest attempt to become innovative. Shares of the blue-chip company gained 3.7 percent in the two days following the announcement of Surface.

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As long time Wall St. Cheat Sheet readers know, a ‘Catalyst for a Stock’s Movement’ is the ‘C’ in our CHEAT SHEET investing framework. The Surface has the potential to provide a large boost to Microsoft shares, but the company will have to execute on the tablet extremely well in order to capture even a small amount of Apple’s success. The Surface is three years late to the party and previous competitors have failed miserably. Last year, Hewlett-Packard Co. (NYSE:HPQ) launched its TouchPad tablet, but discontinued it just two months later, citing poor sales. In fact, interest was only shown for the TouchPad when the company placed a fire sale price of $99 on remaining units. Meanwhile, Dell Inc. (NASDAQ:DELL) crashed and burned with its own Streak 5 and Streak 7 tablets.

The Surface is expected to be released later this year, but many details are still unknown, with the most important one being the price tag. Sources tell DigiTimes that the Windows 8 model with Intel Corp.’s (NASDAQ:INTC) Ivy Bridge processor will cost “at least above $799.” The Next Web, one of the world’s largest online publications of technology news, recently cited unnamed sources in a report that placed the Surface between a price range of $599 and $999. If the Surface is to be successful, it will need to be priced well enough for consumers and businesses to take a chance with a tablet not made by Apple.

On the positive, there appears to be limited downside risk on the Surface. If the tablet is another victim of the iPad, Microsoft will simply fade into the background again as the world’s largest software maker with a boring stock price and a steady dividend. On the other hand though, if the Surface can become successful with either consumers or businesses, it will provide Microsoft with some excitement and a much needed catalyst for its future stock price.

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