Microsoft Short Interest Plunges

By Douglas A. McIntyre Updated Oct 12, 6:56AM EDT · Published Oct 11, 8:46AM EDT

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A resurgent Microsoft Corp. (NASDAQ: MSFT) has picked up some fans on Wall Street, at least if short interest in its stock is any measure. It dropped 9 million to 71.4 million in the period that ended September 30.

Microsoft’s stock price is another indication of the optimism. Its shares trade at $47, against a 52-week range of $39.72 to $50.05. Despite a poor market for tech stocks, Microsoft shares have also well outperformed the Nasdaq over the past three months.

Among the reasons for the strength is Wall Street’s belief that CEO Satya Nadella can execute his three strategies. The first is to press further into the consumer hardware business. Microsoft has just released the Surface Book tablet, which it claims will outperform any rival, which presumably includes the Apple Inc. (NASDAQ: AAPL) MacBook.

Microsoft management said:

Building on its track record of pioneering new categories, Microsoft is redefining the laptop with the new Surface Book — a powerful, high-performance laptop with stunning craftsmanship and incredibly accurate and responsive pen and touch support. Ultrathin, Surface Book combines the impressive power of 6th Generation Intel® Core™ i5 and Core™ i7 processors with up to 12 hours of battery life.

Nadella next initiative is to press further into cloud computing. Even though investors believe that the cloud is critical to every large tech company, the sector is crowded with successful market leaders, which range from Amazon.com Inc. (NASDAQ: AMZN) to desperate old tech companies such as International Business Machines Corp. (NYSE: IBM). Worry is that with so many large corporations competing for the same market, pricing will become commoditized and therefore will drop.

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Finally, and less well promoted, Microsoft continues to play to its traditional businesses, Windows 10 and its suite of products for businesses. Although slowly fading, these still represent a huge portion of Microsoft’s earnings.

Nadella has set the right combination of businesses, at least as far as the new snapshot of short interest shows.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.