4 ETFs To Play Microsoft’s Income Jump (SWH, XLK, VGT, IYW, MSFT, YHOO)

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October 31, 2010 5:17pm NYSE:IYW NYSE:SWH

Core products pushed revenues and net income up at Microsoft (NASDAQ:MSFT) in the third quarter, further extending out the exceptional earnings season witnessed by the technology giants

 and giving further support to the Software HOLDERs ETF (NYSE:SWH), the iShares Dow Jones US Technology (NYSE:IYW) and the Technology Select Sector SPDR (NYSE:XLK) and the Vanguard Information Technology ETF (NYSE:VGT).

According to Microsoft’s Chief Financial Officer, demand for both Windows and Office products have thrived as businesses of all sizes increased technology purchases.  Furthermore, a new version of Microsoft’s flagship software, Windows 7, has sold more than 240 million licenses since its debut a year ago, making it the fastest selling operating system in the company’s history.   Another factor that aided in Microsoft’s performance was sales of Office 2010 which generated $5.13 billion in the quarter and, similar to Windows 7, sold 20 percent more units since the product’s launch that it did of the previous version of Office during the same time period. 

As for the future of Microsoft, fundamentals remain strong in that the Redmond, Washington based company is sitting on a boat load of cash and demand for its software products remains insatiable.  Additionally, Microsoft is forming new partnerships and launching new products that could potentially give it another boost.  Most recently, Microsoft completed the transition of search advertisers from Yahoo (NASDAQ:YHOO) to Microsoft’s online ad system, plans to start selling its Kinect device for its Xbox 360 game consoles and expects its Windows 7 operating system for mobile phones to go on sale next month. 

As mentioned above, ETFs influenced by Microsoft include:

  • Software HOLDRs (NYSE:SWH), which allocates 17.43% of its assets to Microsoft
  • iShares Dow Jones US Technology (NYSE:IYW), which allocates 9.87% of its assets to Microsoft
  • Technology Select Sector SPDR (NYSE:XLK), which allocates 8.36% of its assets to Microsoft
  • Vanguard Information Technology ETF (NYSE:VGT), which allocates 8.15% of its assets to Microsoft.

Written By Kevin Grewal From ETF Tutor   Disclosure: No Positions

Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net, where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor’s degree from the University of California along with a MBA from the California State University, Fullerton. He is a contributing author on The Street – his articles can also be found published on various sites including Yahoo! Finance, The Globe and Mail , Daily Markets, MSN Money, Seeking Alpha, Fidelity Investments, Traders Library, and Minyanville.

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