We all know the ancient Greek legend of the phoenix, a giant and beautiful bird that rises from its ashes, renewed and stronger than ever. A few high-tech companies have experienced this same phenomenon.
Innovation isn't only what prevents a high-tech company from being just another business. Innovation also excites investors and ignites the spark that creates business phoenixes -- and I recently found another phoenix candidate whose pipeline of innovations is simply mind-blowing.
I'm talking about the Bill Gates-created giant, Microsoft (Nasdaq: MSFT).
Microsoft is currently a top performer, but not too long ago, slowing sales in its signature niche diverted investors' attention to supposedly more innovative companies. In fact, most of its $20 billion in revenue and $8 billion in net income in its fiscal third quarter came not from the niche it's famous for, but from its business solutions division.
The company boasts a strong balance sheet. In March, Microsoft reported just under $77 billion in equity and more than $85 billion in cash with about $14 billion in debt. It has a total market cap of more than $270 billion -- and a dividend yield (quite rare for high-tech companies) of 2.9%.
On top of its strong numbers, Microsoft has five potentially disruptive products in the pipeline. If any of these amazing innovations catches on, Microsoft's stock could be propelled sharply higher. A look at these potential game-changers:
|This system expands the useful screen size of a touch-screen device beyond the screen itself by placing infrared sensors along the parameter of the device. This means that screens can get smaller but still be controlled by our fingers.
|This innovation is a thin, clear layer that is placed on top of a regular LCD screen, turning it into a fully functional touch-screen device.
|MirageBlocks is like something right out of Star Trek's hologram technology. It digitizes three-dimensional objects so they can be interacted with on a projected augmented-reality desk. Any physical object can be instantly virtualized and then interacted with using your bare hands.
|This device -- which resembles a desk lamp -- enables people to remotely share any physical object on any surface. Anything you place beneath Illumishare is projected onto the desk of your collaborator.
|LightSpace turns any surface -- and even the space between surfaces -- into a highly interactive area. It transforms the idea of surface computing into the new realm of spatial computing. The implications for this technology are astonishing.|
If these five innovative future products don't get your blood pumping over Microsoft's potential, the company's recent performance should.
The company has been in a solid uptrend since January. Although I usually like to wait for a pullback or breakout close to initiate a position, buying strength right now makes sense in Microsoft. My 12-month target price is $42.
Risks to Consider: Microsoft might not actually launch any of the above products. If they do launch, it is possible that they will be flops regardless of the wow factor. Always use stops when investing and be sure to diversify.
Action to Take --> I love Microsoft right now for its technical strength, pipeline of innovative products and its solid dividend-paying balance sheet. I think this company will continue to innovate, and the sky is the limit for the stock over the long term.