In the report, Nomura wrote, "PC units are now expected to fall 11%-14% in the March quarter (Gartner and IDC respectively), implying accelerating headwinds in the PC business. With the stock back above $30 and PC units in sharper decline, we are downgrading the stock to Neutral from Buy. The combination of Windows 8‘s sluggish adoption and the absence of compelling new hardware have been disappointing, with no relief likely until later this year. We believe half of the customers in the consumer market do not need Office and are unlikely to remain with Microsoft for notebooks or tablets, while the other half likely work in an office setting and continue to produce higher-value content in Office and could be receptive to a new generation of notebooks. An upgrade cycle later this year to a new generation of Ultrabooks that offer longer battery life and lower prices could be a positive catalyst for the stock. The shares remain attractively priced for value-oriented investors, selling at 8.0x calendar 2013E EPS ex-cash and 7.8x EV/uFCF, giving a FCF yield of about 11%." Shares of Microsoft closed Wednesday at $30.28.
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