Jefferies Anticipates Microsoft's Tablet Introduction

According to Jefferies, investors are not willing to pay for growth in Microsoft's (NASDAQ: MSFT) core markets, a trend it expects may change with the success of upcoming Windows phone and tablet launches.

In the research report, Jefferies writes "MSFT shares have underperformed the S&P index by 13% over the past year, despite 7% FY10 revenue growth lead by Windows and record levels of earnings and cash flow lead by opex control. Microsoft has also bought back nearly $11Bn in stock and paid out $4.6Bn in dividends."

"We expect Microsoft to announce the launch of Windows Phone 7 devices on October 11th in New York City. They also have an event scheduled in London on October 4th, so the launch may even be as early as next week. New devices from at least 5 ODMs (Asus, Dell (NASDAQ: DELL), HTC, LG and Samsung) are likely to be available first in Europe, and later in the United States."

Jefferies maintains its Buy rating and $33 price target for Microsoft, which closed yesterday at $24.50.