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Microsoft ‘on the wrong side’: Dan Niles

Thursday, 18 Jul 2013 | 6:14 PM ET
Microsoft 'on the wrong side': Dan Niles
Thursday, 18 Jul 2013 | 12:00 AM ET
Microsoft has a larger, long-term problem that can't be ignored, AlphaOne Partners Co-CIO Dan Niles says.

Microsoft has a larger, long-term problem that can't be ignored, AlphaOne Partners Co-CIO Dan Niles said Thursday.

"We are already negatively positioned in the name," he said when asked if investors should be shorting the stock, noting that Microsoft had missed on revenues four out of the past five quarters.

(Read More: A contrarian PC play from Dan Niles)

On CNBC's "Fast Money," Niles also noted that Google, which reported quarterly earnings in a row, had missed seven targets in a row on its top line.

"The only reason these stocks have done as well as they have is, you know, the multiples have expanded," he said. "It's not because they've been beating earnings."

Niles pointed out Microsoft's broad misses.

Top tech trades
Chipotle beat on the bottom and top lines, reports CNBC's Josh Lipton; and discussing what the market is hearing out of the technology sector as key earnings come out, with Dan Morgan, Synovus Trust.

(Read More: Microsoft, Google disappoint; shares pay the price)

"And they came in light on Windows and Windows Live," he said. "They missed servers and tools. They missed online. They missed business, and they missed entertainment and devices. They missed all five segments of their revenue stream."

The decline of the PC market was another serious headwind for Microsoft, Niles added.

"Even in 2008, when Lehman Brothers collapsed, the PC market unit grew," he said. "If you look at last year, the PC market unit shrank. If you look at this year, it's going to shrink even more, close to 10 percent. And the problem is, you're going to have more tablets sold probably in the fourth quarter of this year than you are notebook computers."

Microsoft's performance in the tablet space, evidenced by its write-downs, held little cause for optimism, Niles added.

(Read More: Google stock to top $1,000 per share: Pro)

"People are getting comfortable with tablets that don't have Microsoft on it, and they're getting comfortable with smartphones that don't have Microsoft on them. And that's the real problem. I'm not saying the dividend isn't nice, and it's great having restructuring, but you can keep restructuring this thing as the stock keeps going down," he said. "They're on the wrong side of the market. That's the problem."

Trader disclosure: On July 18, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long MSFT; Guy Adami is long AGU; Guy Adami is long NUE; Guy Adami is long BTU; Guy Adami's wife, Linda Snow, works at Merck; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long C; Karen Finerman is long JPM; Karen Finerman is long GOOG; Karen Finerman is long M; Karen Finerman is long WLP; Karen Finerman is long MDY PUTS ; Brian Kelly is long YEN; Brian Kelly is short US DOLLAR; Brian Kelly is long SPY puts; Dan Nathan is long BBRY ; Dan Nathan is long FB July/Aug 25 call spread; Dan Nathan is long QCOM Aug 65 calls; Dan Nathan is long VIX Aug 15/20/25 call fly; Dan Nathan is long EBAY July 52.5 calls; Dan Nathan is long TLT July 110 calls.

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