Microsoft Falls as the Dow Loses Ground
byAug 30th 2013 2:45PM
Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
Stocks are having an up-and-down day if there ever was one. The Dow Jones Industrial Average has swung back and forth since the start of the day, but it hasn't managed to hit breakeven. As of 2:35 p.m. EDT, the blue-chip index has lost a modest 18 points. Dow components aren't moving much on the day, but most stocks on the Dow are in the red. Let's catch up on the stock action you need to know about.
Microsoft looks forward
Microsoft is falling today as all eyes continue to watch how the company handles the succession process for outgoing CEO Steve Ballmer. Whoever follows in his stead will have their work cut out for them, and nowhere is that more evident than in the company's recent product launches.
Price cuts to the company's lagging Surface Pro tablets were set to expire Thursday, but Microsoft made those cuts permanent in an attempt to shore up lackluster sales of the tablets. That's the second price cut already made to the Surface lineup, as Microsoft was earlier forced to implement cuts to the Surface RT line back in July. To be fair to the company, the Surface Pro began its life as an expensive product: Its $899 original price was just a shade under the most expensive model of Apple's iPad, and the company has had a hard time keeping pace with Apple.
Can these cuts help? Sales have been far below expectations so far, especially considering that Microsoft took a $900 million writedown on the Surface RT. Ultimately, the best course of action for a new Microsoft chief might be focusing on what this company has always done best. In its most recent fiscal year, Microsoft posted more than 9% sales growth in its server division and also posted slight sales growth in its business division. These are by far the company's two largest segments by sales, and an increased focus on the company's core could offset the Surface and other failed attempts to match Apple and other tech leaders.
Johnson & Johnson is also having a tough day. After the government pushed for stronger labeling on drugs, J&J has added a new, bright red warning label on its Tylenol brand of medication to caution consumers of the possible fatal risks of taking too many of the pills. Tylenol operates in a lucrative market: Over-the-counter drugs with Tylenol's active ingredient, acetaminophen, pulled in more than $1.75 billion last year, per data from research and information service firm Information Resources.
However, it's unlikely that this will shake Tylenol's sales much, and even if it did, J&J's consumer business is its smallest and slowest-growing business division by sales. The segment posted growth of just 1.6% over the year's first half -- far behind what the company's pharmaceutical and medical-device and diagnostics branches did. Consumer sales are an important part of J&J's stable business model, but they're also unlikely to see the growth of an area such as blockbuster drugs. Investors shouldn't get too worked up over this new turn of events.
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The article Microsoft Falls as the Dow Loses Ground originally appeared on Fool.com.Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Apple and Johnson & Johnson. The Motley Fool owns shares of Apple, Johnson & Johnson, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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