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Microsoft did something it is never done before it sold debt in fact about three point 75 billion dollars worth.
Let's find out Brendan Barnicle senior research analyst at Pacific Crest Securities he joins us now from Portland organ.
All of the rumor mill churned Brendon that the whole thing right it's like what are they gonna do what the money to get a -- and SA Pete.
Which we know they went after a few years ago based on court documents rights and anti trust that the came out there talking to get by Yahoo!.
Are they gonna buy -- their own stock or -- just -- set.
A pile of cash which one.
I think divine -- on stockman and they use it that way and in the continue to improve there there war chest they've always had a lot of us cash on hand.
Then they'll generate at least as much cash just for free cash flow this quarter as they -- yesterday -- This and Microsoft's terms is not a significant amount of -- and certainly not enough to do something like SEC well from a -- -- it is typically effective it's pretty boring also on the new -- it would go out you know make some big splash of me but I guess that the stock goes up.
That's good news.
Is it gonna help if they do that they buy back their own stock is it going to help.
The current shareholders.
Absolutely and its shareholders have been clamoring for this for a while they wanna see Microsoft leverage to balance she's accessed a huge -- was never any debt didn't make any sense given the cat food had to -- the rates.
And which -- bar right now and as I spoke to Max out about this yesterday they made it very clear that they think that there's a great opportunity to get great rates right now.
And that's -- their message didn't do anything they like a lot of people.
Have fears about inflation about rates going up and -- realizing get some print likened some pretty good rates now.
I'm on the SAT thing though.
You know they think that both from a valuation and the EU regulatory perspective -- be very difficult for them to do anything right now you're right they did look at -- several years ago.
I think that this would be sort of a mess to integrate and -- investors would look on that very farmland off that's for Yahoo! they've been you know just you know talking about that for a while now.
Trying to allay the concern that they might do -- purchase there.
More likely they'll be some sort of strategic arrangement that may involve some amount of money changing hands as an upfront payment.
But nowhere near what they would have had to do that -- bought it -- right.
Pilots to back to Microsoft fundamentals the big news Windows 7 right some of the beta versions around it's gonna be publicly released.
I guess in the fall -- sort of toward the end of the year.
Now for people who don't like Windows Vista maybe that's good news branded but I got -- after Microsoft or you're -- one of their OEM partners are probably not happy.
Because why would anybody -- by anything that involves Vista or new laptop if I know another version is coming out.
Yes O'Brien what they've done on that.
They recognize that's been a concern for years.
So what they did during the Vista -- likely do again this time -- I -- take guarantee where.
You buying any -- a laptop with -- -- PC with Vista on it within a certain number of months before we get the release -- Windows 7.
You'll get an automatic right to an upgrade now allow not a -- take advantage of that it's certainly -- -- -- -- that there's no need to necessarily wait until Windows 7 actually comes out.
You know that said I think that it is worth waiting for -- going to be a huge new product for them.
And really gonna make a difference this is really Vista done right.
I think consumers are gonna respond to a and a president -- -- to it.
I think we're gonna see this be actually much bigger than we -- people are expecting right now is it gonna be a catalyst for the stock though a stock that it once was mid thirties now what.
Made twenty -- range for Microsoft.
Yeah I think it can be a catalyst for the stock and a couple fronts on the 1968.
My apologies -- -- I'm -- you see it work for a couple of reasons first of as a yet.
He itself was in the can boost earnings we think that is he going to next year and counter -- could add as much as twenty cents to the model sitting in Thailand and -- to be well over two bucks -- earnings to -- basis to certainly get back into the -- If you have mid to high twenty dollar -- up.
Did you attend potential of upside from where we are now.
So you get that hard -- -- -- the other thing just perceptual it will help and -- can help the multiple expansion right now myself trading at a discount to the S&P.
-- really because people have been so disappointed around the recent product releases I think a strong product of them will be the very encouraging I think this potentially could be something.
Akin to what we so windows 95 windows 98 we haven't seen a cycle like data Microsoft in a decade -- could be.
I mean is a big debate about whether Vista was a -- Microsoft blog hey it's not look at the numbers and it took some time.
But of course it was critically panned I mean giving Windows 7 could be another of that -- we haven't had a real favorable product cycle from Microsoft and awhile.
Later this partly that's partly the nature of my confronting Saddam I don't remember if you think back ten years ago on windows XP came out it was also sort of -- in an effect.
The first twelve months after XP came out client revenue grew by 1%.
Now -- because they're releasing your way into the teeth of the 01 and two recession just had a big build -- a Y two K.
But windows XP which everyone now thinks it is sort of like the standard I remember -- people of the time of acumen and people were saying why would I ever move off of my windows 98.
I see no one's -- windows 98 anymore.
But we now have 820 million PCs globally they're running windows XP your older versions of windows something other than this -- Just based on Microsoft average day is he on that that's about a 44 billion dollar opportunity to Microsoft has just replacing those PCs -- is -- a big deal the Windows 7 though is likely to miss back to school on down by a kid in new laptop hope holed up.
Doesn't have the latest version windows.
The weight of the thing is we're not entirely clear when that comes after back to school in terms of maybe having a July recent release to be in the fall back to school -- that's unlikely.
I'm leaving it's more like -- -- comes out after back to school that you got the tech guarantee program place.
You could easily upgrade from from this to the Windows 7 pretty quickly.
Brendan Barnicle of an outperform on Microsoft the Pacific Crest Securities.
-- -- and we appreciated thank you very much.
Thank you are.
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