Karl O.Strøm
23 Nov 2023 | 3 min read

At the end of November, Microsoft is the American company with the second highest market value, only narrowly beaten by Apple. MSFT weighs 7.29% of the S&P 500 index and a whopping 10.49% of the NASDAQ 100. This is a lot, and for example above the maximum threshold of 10% for weighting in individual companies if one is to follow the Norwegian Securities Fund Act. The company is among those with the longest history of today's tech giants, and worth taking a closer look at.

History and position

Microsoft belongs to the type of company that provide products most of us use every single day. If you work in an office and use a PC, there is a good chance that the operating system is a variant of Microsoft Windows, and that the Office package with Outlook Mail, Word for word processing, Excel spreadsheets and PowerPoint for presentations is installed. There are alternatives to all of these, but the overall package gives Microsoft an enormously strong position. They have developed and strengthened this over several decades, and over time built a number of value-adding services around their core product.

The company was started in 1975 by childhood friends Bill Gates and Paul Allen. The first activity was to build software for Altair's 8800 Microcomputer and the name therefore became a mixture of "Microcomputer" and "Software". Their big breakthrough came 5 years later in 1980, when they entered into a collaboration with IBM to develop an operating system for the new product IBM Personal Computer, i.e. a PC. This resulted in Microsoft's MS-DOS, which became the dominant operating system for PCs. Another 5 years later, in 1985, the first version of the Windows graphical user interface was introduced as a competitor to Apple's popular Macintosh. In 1990, they came up with the office suite Microsoft Office containing the programs we all know such as Word, Excel, Outlook, and PowerPoint.

In 2010, Microsoft's cloud service Azure was launched, and the company is today day one of the world's largest players in this area as well. Finally, one must mention AI, which is the hottest topic in the stock market right now. The fact that Microsoft has a large stake in OpenAI, which is behind Chat GPT, has received the most attention. At the time of writing, there is turmoil in OpenAI, and its CEO has just announced his transfer to Microsoft. In addition to its stake in Chat GPT, Microsoft also develops and offers AI tools linked to its cloud platform and other services. There is no doubt that they are and will be a significant player in the AI area.

Microsoft thus has an extremely strong, close to monopolistic position in several of its business areas. They have been very good at building on this and developing profitability. A few years ago, they made a successful switch from selling their software once (when buying a PC) to selling it as an annual subscription. This has been very profitable, and together with cloud-based services (including AI) provides a strong cash flow to the company.

Living with Microsoft

I myself experienced that Windows was introduced while I was learning computer science at secondary school. For the entire time since then, Microsoft's products have been part of life both at work and private. However, it must be said that the products are of the type that I use, but do not like. The operating system has provided countless hours of frustration, and only the very latest variants work nearly as well as Apple's. Excel still has the same bugs and error messages as 20 years ago, and the Norwegian word list in Word is neither updated nor coordinated with the corresponding list in Outlook. Overall, it seems that user experience is not at the fore. I also find myself thinking that when they can't get such seemingly easy fixes sorted out, how good can their AI tools be?

But the products generally work OK, and the overall packaging of tools has such a dominant position that it is difficult to ignore.

The stock

As always, shares can be assessed according to both fundamental, technical, and quantitative criteria. Microsoft is followed by a large group of analysts, so finding a new angle there is difficult. In my systems I can see the S&P consensus estimates and they show 35 strong buy recommendations, another 13 normal buy recommendations and finally 5 hold recommendations. None of 53 analysts rate it a “sell”. The price (P/E) is 33.9 times this year's estimated result. Sales growth is expected to be 14.5% compared to last year, and growth in earnings per share about the same. Both the balance sheet and the income statement look healthy. Dividends are paid, and shares are bought back. All in all, it is difficult to have anything to object to this other than that the stock is not cheap. The inverse of the P/E indicates an earnings yield of 2.95% and that is lower than the interest you can get on bonds in the USA now. Expensive, but on par with what the other IT giants are trading at by multiples.


This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.

The products are not capital protected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.

This information is neither an investment advice nor an investment or investment strategy recommendation, but advertisement. The complete information on the trading products (securities) mentioned herein, in particular the structure and risks associated with an investment, are described in the base prospectus, together with any supplements, as well as the final terms. The base prospectus and final terms constitute the solely binding sales documents for the securities and are available under the product links. It is recommended that potential investors read these documents before making any investment decision. The documents and the key information document are published on the website of the issuer, Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany, on and are available from the issuer free of charge. The approval of the prospectus should not be understood as an endorsement of the securities. The securities are products that are not simple and may be difficult to understand. This information includes or relates to figures of past performance. Past performance is not a reliable indicator of future performance.

Investors in the products are exposed to the risk that the Issuer or the Guarantor may not be able to meet its obligations under the products. A total loss of the invested capital is possible. The products are not subject to any deposit protection.

The value of the products can fall significantly below the purchase price due to changes in market factors, especially if the value of the underlying asset falls. The products are not capital-protected

Due to the leverage effect, there is an increased risk of loss (risk of total loss) with leverage products, e.g. Bull & Bear Certificates, Warrants and Mini Futures.

If the product currency differs from the currency of the underlying asset, the value of a product will also depend on the exchange rate between the respective currencies. As a result, the value of a product can fluctuate significantly.

Stay updated

Subscribe to receive information about structured products

Your personal data will be processed to provide information as per Vontobel Privacy Policy.

newletter overlay image

Stay updated

Subscribe to receive information about structured products

Your personal data will be processed to provide information as per Vontobel Privacy Policy.

Vontobel Markets – Bank Vontobel Europe AG and/or affiliates. All rights reserved.

Please read this information before continuing, as products and services contained on this website are not accessible to certain persons. Of importance are the respective prospectuses which are attainable from the issuer: Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, DE-60323 Frankfurt am Main, Germany, as well as from this website.