Is Microsoft A Smart Bet For A Short-Term Trade?

| October 15, 2010

The race for market share in smartphone operating system software is about to take an interesting turn.

Symbian, which is heavily backed by Nokia (NOK), is the global leader with more than 40%.  And Research In Motion (RIMM) with its popular Blackberry is second at 17.5%.

But both of them are under heavy pressure from upstarts Apple (AAPL) and Google (GOOG).

Symbian and RIMM have been steadily losing share to Apple.  Over the past few years, Apple’s iOS software has gobbled up 14% of this lucrative market.  With its introduction of the iPhone, Apple single-handedly took the smartphone market to a whole new level.

But the big story over the past year is Google’s Android software.

The ‘Droid has quickly overtaken Apple and is poised to snatch second place from RIMM.  Android’s market share has soared from just 1.8% share a year ago to an astonishing 17.2%.  Handset makers and application developers are rapidly adopting Android because Google gives it away for free.

But now the race has a newly rejuvenated participant…

This week Microsoft (MSFT) unveiled their latest smartphone operating system dubbed Windows Phone 7 (WP7).  New handsets running WP7 from Samsung, LG Electronics, and HTC will go on sale in early November.

Wireless service in the U.S. will initially be provided by AT&T (T) and T-Mobile USA.  Sprint Nextel (S) and Verizon (VZ) are expected to begin offering WP7 handsets early next year.  In all, WP7 will be available through 60 carrier partners in 30 different countries worldwide.

The software giant hopes WP7 can reverse the company’s huge market share losses.

Just 15 months ago Microsoft owned a respectable 9.3% share of the global market.  At the end of June 2010, the company’s share had plunged to a measly 5%.  They’ve clearly dug themselves a hole by letting Apple and Google get a two-year head start.

I think WP7 will go a long way toward helping Microsoft catch up to the competition.

Here’s why…

The new phones are stylish and more appealing than previous windows-based smartphones.  The user experience is improved with Tiles replacing the clutter of individual app icons.  And business people will appreciate the integration of Microsoft Office and Outlook.

Of course, this raises an interesting question… Are Microsoft shares poised for a big rally?

Microsoft is forming what’s called a symmetrical triangle pattern.  Most symmetrical triangles are continuation patterns.

However, in some cases, symmetrical triangles mark important trend reversals.
  If this triangle is indeed a reversal pattern, we’ll see the shares break out on heavy volume to the upside.

I think an upside breakout’s coming…

We know the new smartphones running Microsoft’s WP7 software are about to hit the market.  The positive buzz around this event should attract investors.

It’s definitely a catalyst that could send the shares surging higher in a short-term rally.

If you’re looking for a short-term trading idea, take a closer look at Microsoft.  I think there’s a good chance to make a solid 15% to 20% return in relatively short order.

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Category: Stocks

About the Author ()

Robert Morris is the editor of Penny Stock All-Stars, an investment advisory focused on discovering small-cap and micro-cap stocks that are destined to become the market’s next Blue Chips. The Wall Street veteran and small-cap stock specialist is also a regular contributor to Penny Stock Research. Every week, Robert shares his thoughts with our readers on a variety of penny stock-related topics. In addition to Penny Stock Research, Robert also writes frequently for two other free financial e-letters, ETF Trading Research and the Dynamic Wealth Report. He’s also the editor of two highly successful and popular investment advisories, Biotech SuperTrader and China Stock Insider.

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