Microsoft Stock 'Inexpensive' As Big Upgrade Cycle Looms

With 84% of global PCs still running XP/Vista and 63% of Office users still on versions from 2003 or earlier, Microsoft is looking at some serious growth potential over the next couple of years, says enterprise software analyst Brent Thill.In a research note issued with "Woodstock for Analysts" in the subject line, Thill-head of software research at UBS-said those numbers indicating a huge volume of aging Microsoft products indicates that "MSFT is in a very strong position to capitalize on the PC/Server refresh."

Thill added, "FY11/12 will be driven by a very promising upgrade cycle and in our view MSFT is well positioned post-product cycle with a robust cloud strategy."

Regarding Microsoft's Azure strategy, Thill wrote that "70% of FQ4 cloud wins were new customers suggesting cloud can be additive vs. cannibalistic. Its biggest challenge is in getting channel partners behind its cloud efforts."

Those factors plus Thill's belief that Microsoft will make a serious run at the tablet business led him to peg Microsoft's current stock price as "inexpensive" and worthy of a buy rating, with a price target of $35.

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