After posting modest gains during premarket trading, Microsoft (MSFT) is aiming for big gains on Friday amidst both positive and negative news about the tech mogul’s services. The Wall Street Journal announced earlier today that Microsoft is buying Yammer, a social networking service for businesses, for $1.2 billion. Many hope that this service will diversify Microsoft’s product range by filling key holes and help them stay competitive with companies like Google (GOOG) and Salesforce.com (CRM). On the other end of the spectrum, Nokia’s (NOK) CEO, Stephen Elop, admitted the poor performance of Windows based phones contributed to the debacle that saw Nokia’s share price plunge 18% yesterday after announcing plans to layoff 10,000 workers.
All of these stories appear to be taking a back seat to an eagerly anticipated Microsoft announcement on Monday that may may decide the fate of Nokia’s stock. Microsoft will not release specific details on the planned topics for the meeting, and Business Insider has reported that experts are split. Some are expecting news related to a Windows RT tablet device, others expect news concerning its Xbox Music service.
Regardless of what the news may be, many traders are committing one of Scott Redler’s cardinal sins: buying the gossip and selling the facts. When the market closed yesterday, Microsoft’s stock held at $29.13, down 11.1% over the past three months. The tech giant has yet to describe how they intend to incorporate Yammer or whether it can become a sustainable source of revenue. Moreover, if Stephen Elop is unable to salvage the Finnish cell phone maker, Microsoft may be forced to intervene and save the company that tried and failed to incorporate Microsoft’s Windows phone technology. Nokia just has not been able to compete with other giants such as Android and Apple (AAPL).
Technically, Microsoft’s stock will face some local resistance around the $31-$32 level if it tries to maintain today’s momentum on Monday after the meeting. If the announcement elicits some skepticism and investors flee, the nearest source of support comes around the $28.25 level and may fall down to the major support area of $26—a price it has not seen since the start of the year.
This stock shows signs of instability and probably shouldn’t be touched. It has been in a downward sloping channel for the past month and a half, and investors are buying into a stock that has been both leading and lagging the market. Wait to see how experts receive the news on Monday and prepare for a move that may be even more volatile than the overall market.
By Evan Myer