Microsoft is underpriced

While the world was all a flutter with the  press claiming that Apple was “bigger” than Microsoft, Wall Street analysts were apparently scratching their heads.

Desperate to write positive Apple stories, the trade press and the BBC churned out a press release which said that since the value of Apple shares were” worth more than Microsoft”, then Apple was “bigger than Redmond”.

However saner heads have prevailed this morning and financial houses are saying that Apple is over priced and Microsoft is under priced.

The market value is supposed to indicate future profits, and yet with the best will in the world there is no way that Apple is, nor can it make that much money.

Microsoft, on the other hand, can make the sort of profits that justify a higher share price. So what is going wrong?

Sarah Friar, an analyst at New York-based Goldmine Sex, wrote in a report to clients that Microsoft shares were hugely undervalued and she recommended buying them

Microsoft’s fourth quarter earnings, scheduled for July 22, will show signs of improving corporate demand for personal computers. On average, analysts surveyed by Bloomberg estimate sales of $15.2 billion at the world’s largest software maker, compared with $13.1 billion a year earlier.

Microsoft’s Windows business has benefited from increased consumer demand for personal computers, corporations have avoided purchases of machines and long-term contracts. Investors held out for evidence of a spending resurgence after chipmaker Intel Corp. forecast record profit margins for 2010.

Ballmer said in New Delhi yesterday that the stock market is a voting machine, in the long run only is it a weighing machine. It is fairly clear who weighs more in a contest between Ballmer and Jobs.