Morgan Stanley Gets Tough on Microsoft and EMC

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“It’s too early to call the game one way or another,” said Qualcomm (NASDAQ:QCOM) chief executive Paul Jacobs regarding Microsoft’s (NASDAQ:MSFT) mobile platform at the Consumer Electronics Show. “I never count out Microsoft out because they’re willing to put a lot of effort into things, they play the long game, they’ve got a lot of resources…”

While Qualcomm provides the chips for Google’s (NASDAQ:GOOG) Android smartphones, a Windows Phone competitor, VentureBeat reported that “Jacobs’ faith in Windows Phone seemed genuine.” But this opinion was not shared by Morgan Stanley. The financial services firm downgraded shares of the software manufacturer on Thursday from Overweight to Equal-weight, based on its belief that the company has a long way to go before recovering from the end of the personal computer era.

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In the firm’s research note seen by Benzinga, Morgan Stanley noted that the company’s shares were “too cheap, had multiple non PC drivers and an attractive 3.5% dividend yield.” But those factors were far outweighed by the ever-weakening PC demand. With Microsoft’s Windows Phone yet to make a significant dent in the smartphone market and sales of the Windows 8 operating system a disappointment, the firm argued that the company could not successfully offset the falling PC sales at this time. However, analysts at Morgan Stanley did grant that the PC problem may already be priced in at 8x earnings-per-share.

Microsoft was not the only technology company judged harshly on Thursday by Morgan Stanley. Shares of EMC (NYSE:EMC) were downgraded to Equal-weight from Overweight by analyst Katy Hubert. In a research note seen by Barron’s, she wrote that while the fourth quarter “turned out to be challenging for hardware in general, our channel checks suggest storage experienced the largest negative change on the margin.” But as the publication reported, BlueFin Research Partners assessed the situation differently. Analyst Rick Gately stated that his research showed that the company had secured enough business in December to meet analysts’ revenue estimates for the quarter, which stand at $5.91 billion to 6.06 billion.

Shares of EMC closed at $23.85, while Microsoft ended the day trading at $26.46 per share.

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