Kate ReigleNovember 29, 2011

About the Company

• Develops the Windows PC operating system, the Office suite of productivity software, and enterprise server products

• The Windows PC and Office franchises collectively account for nearly 60% of the firm's revenue, and the server and tools business contributes 24%.

• Other businesses include: Xbox 360, Bing, business software, and software for mobile devices.

Strengths• Brand Recognition• Rapid product innovation• Microsoft Office• Customer Support

Weaknesses

• Slow to realize opportunities– Google vs. Bing

• Insignificant presence in the smartphone market

Opportunities

• Xbox 360 video game • Smartphone market• Cloud computing

Threats

• Apple products• Other manufacturers such as IBM, Sun, and

Oracle• Disappearing need for PCs due to increase in

mobile technology• Piracy

Recent News

• Partnering with TechStars to leverage the Kinect in different ways

• Operation in Our Sites Regulation• Oct. 20: first time Microsoft has posted a year-

over-year gain in Windows revenue since the end of 2010. – Revenue in the Windows division grew nearly 2%

Checklist

•Meets 6/10 criteria

Criteria Requirements: Company Industry Good or BadSolvency and Financial Leverage Ratios: Current Ratio > 1 2.6 1.99 Debt Ratio < Industry Average 20.88 14.36 BADEfficiency Ratios: Total Asset Turnover > Industry Average 0.72 0.75 BADInventory Turnover > Industry Average 14.75 13739.11 BADProfitability Ratios: Net Profit Margin > Industry Average 29.17 17.46 Return on Asset (ROA) > Industry Average 23.77 12.44 Return on Equity (ROE) > Industry Average 44.84 22.61 Growth Ratio (5 years): Historical EPS Growth > Industry Average 17.63 6.99 Historical Revenue Growth > Industry Average 9.57 11.77 BADProjected EPS Growth >10%* and > industry Average -- -- Other Informative Data: P/E 10.2 13.8 P/B 4 4 PEG 0.8 -- Fair Value Estimate 32 -- Current Price (11/28/2011) 24.81 Purchase Price 25.32 Dividend 0.8 Dividend Yield >2%** 2.3 1.4 Shares Owned 75

YTD Chart

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Recommendation

• Morningstar– Fair Value: $32.00– Consider Buy: $22.40– Consider Sell: $43.20