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After Hours Action - Microsoft

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Shares of Microsoft rose in extended trading after the software giant reported a 2 percent rise in quarterly profit, driven by sales of new computer server software.

As expected, they lowered their full-year earnings forecasts to account for a toughening economy but the outlook was less negative than some investors expected.

"One of the things we look at Microsoft for is their outlook for how business are doing, and it seems as if their business-oriented division did pretty well in the quarter, " says Kim Caughey, senior analyst, for Pitt Capital Group.

Buying Opportunity?

“If you are a Microsoft investor you should be happy that Microsoft thinks they will weather the storm relatively well," says Morningstar analyst Toan Tran.

It’s a valuation play, adds Guy Adami. At 11 times earning you have to ask yourself, ‘do you think it’s attractive?’

I think their stock is cheap, adds Tim Seymour. I think a lot of investors are going to be piling in. Remember, their revenue is from licensing.

Microsoft is a great stock, counters Pete Najarian, but they’ve got to show growth. Right now they’ve got nothing going. Does anyone own a Zune?

“We have a buy on Microsoft,” adds UBS software analyst Heather Bellini. “But expect estimates to come down and their profitability to come down because they can’t sidestep all the weakness in the economy.”

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Down The Road

The other thing you have to think about for Microsoft is what’s going on with the whole craze of netbooks which are very popular in Japan and just making their way here. (They’re minicomputers that aren’t full functioning laptops but are fine for surfing the web and word procession.) That could eat into the revenue Microsoft receives from licensing.

And if you're looking for a play on minicomputers, Intel could be one possibility, Bellini says.




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Trader disclosure: On Oct.23 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Macke Owns (MCD), (MSFT), (WMT), (SDS), (UUP), (BNI); Seymour Owns (AAPL), (F), (MER); Seygem Asset Management Owns (RIO); Najarian Owns (BNI) And Is Short (BNI) Calls

Heather Bellini is a software analyst for UBS. Following are her related disclosures.

UBS Securities LLC Has Received Compensation From (MSFT) Within Past 12 Months;
(MSFT) Is Or In Past 12 Months Has Been A Client Of UBS Securities LLC (Non-Investment Banking Securities-Related Services): (MSFT) Is Or In Past 12 Months Has Been A Client Of UBS Securities LLC (Non-Securities Services)
UBS AG, Affiliates Or Subsidiaries Owned 1% Or More Of VMWare Securities As Of Last Month's End
The U.S. Equity Strategist, A Member Of His Team, Or One Of Their Household Members Has A Long Position In (EMC)
(EMC) Is Or In Past 12 Months Has Been A Client Of UBS Securities LLC (Non-Investment Banking Securities-Related Services)
(EMC) Is A Client Of UBS Securities LLC (Non-Securities Services)
UBS Securities LLC Has Received Compensation From (ORCL) In Past 12 Months
(ORCL) Is Or In Past 12 Months Has Been A Client Of UBS Securities LLC (Non-Investment Banking Securities-Related Services)
The U.S. Equity Strategist, A Member Of His Team, Or One Of Their Household Members Has A Long Position In (ORCL)
UBS Securities LLC Has Received Compensation From (ADBE) In Past 12 Months
(ADBE) Is Or In Past 12 Months Has Been A Client Of UBS Securities LLC
(ADBE) Is A Client Of UBS Securities LLC (Non-Securities Services)
(ADBE) Is Or In Past 12 Months Has Been A Client Of UBS Securities LLC (Non-Investment Banking Securities-Related Services)
UBS Securities LLC Has Received Compensation From SAP AG In Past 12 Months
SAP AG Is Or In Past 12 Months Was An Investment Banking Client Of UBS Securities LLC
SAP AG Is Or In Past 12 Months Was A Client Of UBS Securities LLC (Non-Securities Services
)
UBS Securities LLC Has Received Compensation From (INTC) In Past 12 Months
The U.S. Equity Strategist, A Member Of His Team, Or One Of Their Household Members Has A Long Position In (INTC)
(INTC) Is, Or In Past 12 Months Was, An Investment Banking Client Of UBS Securities LLC
(INTC) Is Or In Past 12 Months Was A Client Of UBS Securities LLC (Non-Investment Banking Securities-Related Services)
(INTC) Is Or In Past 12 Months Was A Client Of UBS Securities LLC (Non-Securities Services)


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