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Friday, September 15, 2006

Goldman Sachs Raises Microsoft Target; Others May Follow

In a research note today, Rick Sherlund of Goldman Sachs lifted his target on Microsoft (MSFT) from $30.00 to $33.00. This call has some updates and suppositions, but he is considered one of the leading outside authorities in the stock.

He cited for the upgrade partly share buybacks, but was positive on new product releases. This follows the initial feedback on Windows Vista being good and us being essentially one quarter away from its launch. The research note points to expectations for its new Zune media player confirmed yesterday, but thinks that the Apple share of the market and loyalty to itunes could be a market constraint.

One interesting note here is that he had modelled a March launch and now thinks it will be a late January or early February launch for Windows Vista. This notes that he feels vouchers or coupons will be released in late November so that the PC sales for the holidays are not slow. He laid out a few scenarious about what it could mean financially, but the revenue change to a model would only be 2-4%.

His last part of the note said that he expects Xbox 360 to win out over Sony's PS3 and he even stated that he expects Xbox will be a profitable operation one year out.

The key piece of data in this note is that Rick Sherlund is considered "The Axe" on the street as the analyst most accurate and connected to Microsoft. This research note actually has a lot of "update" information in it that one would have honestly expected him to have already come out with, but since he is the axe you can probably expect others to follow suit. Most analysts have had positive official ratings on MSFT for what seems like forever, so rating changes may be in the form of estimates and price targets if teh street follows suit.

MSFT is trading up 0.75% at $26.53 pre-market on almost 700,000 shares; and that is after the stock closed up $0.35 at $26.33 yesterday on 74 million shares.

Jon C. Ogg
September 15, 2006

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