What will Microsoft do next?

Microsoft Corporation (MSFT) shares are down 8% in the last month thanks to not impressing Wall Street last earnings call and the Yahoo (YHOO) drama.  It seems the Street has knocked down the world's biggest software maker without any regard to what 2008 could bring for MSFT, such as record XBOX and software sales.  So is MSFT undervalued at $28 a share? 

So what will happen with Microsoft and Yahoo!?  Which platform will they use?  How will they combine their technologies?  How much will that cost?

With MSFT shares are $28, you just gotta ask, "Why would you care?"

Microsoft has plenty of money, and keep in mind they are one of the few 'tech' companies that pays a dividend every quarter.  Masters, never bet against Carl Icahn, he will get Yahoo sold and Microsoft will buy them, it's a done deal.

Icahn disclosed last week that he owned 10 million shares, with options to acquire 49 million more, and said he will pursue a proxy fight if Yahoo doesn't agree to terms with Microsoft.

Thanks to GTA, Microsoft said last week it has sold more than 10 million Xbox 360 video game consoles in the United States, making it the first of the current-generation consoles to reach that mark.

Worldwide, Microsoft has sold more than 19 million units, including the U.S. numbers. 

The U.S. milestone, according to Microsoft, is significant because it's an indication of Xbox 360's future market performance. "History has shown us that the first company to reach 10 million in console sales wins the generation battle," Don Mattrick, senior VP of the interactive entertainment business in the entertainment and devices division at Microsoft, said in a statement.

The Xbox got a significant market boost following the April 29 release of "Grand Theft Auto IV," which had the hottest debut in the history of video games. Gamer maker Take-Two Interactive Software sold 6 million units worldwide in the first week. The company makes versions for the Xbox and Sony's PlayStation 3.

Microsoft said on its Gamescoreblog last week that retailers reported that more than 60% of all GTA games sold in the first week were for the software maker's Xbox 360 video game console. This would lead one to believe that the remaining 40% were for Sony's PlayStation, but the consumer electronics company has been mum on GTA's impact.

Microsoft, however, said its own data shows that Xbox 360 sales at retailers went up 54% week over week as a result of GTA's success the first week. In addition, about 40% of the people buying new Xboxes also bought a copy of GTA IV.

Then there's last month earnings call, Microsoft Corp. fiscal third-quarter profit fell 11 percent from a year earlier, when the software maker reported more than $1 billion in deferred revenue tied to delays in the launch of the Windows Vista operating system.

Microsoft said its net profit for the three months ended March 31 fell to $4.39 billion, or 47 cents per share, from $4.93 billion, or 50 cents per share, in the same period last year.

The results still beat Wall Street's expectations. Analysts surveyed by Thomson Financial forecast a profit of 44 cents per share.

But investors didn't approve of the guidance for 2009 and MSFT shares have been falling ever since.

Fellow Masters, to be against Microsoft is foolish, don't count them out because they haven't made Wall Street happy, they could buy Wall Street if they wanted to.  Time will tell, but MSFT is a stock I would never place a short bet on, investors be warned.

Disclaimer: The Author has a long position in MSFT.