UPDATE 1-FBR ups Microsoft to outperform, shares rise

Thu May 27, 2010 9:26am EDT

* PC refresh cycle to boost Microsoft's desktop products

* Shares rise 2.3 percent

May 27 (Reuters) - FBR Capital Markets raised its rating on Microsoft Corp (MSFT.O) to "outperform" from "market perform," citing a strong corporate PC refresh cycle and multiple product cycles across all divisions that could benefit the company throughout 2011.

Shares of the world's biggest software maker rose 2.3 percent in trading before the bell Thursday.

The stock presents an attractive risk/reward, given its recent underperformance and improving fundamentals, the brokerage said.

Microsoft shares are down 14 percent since the start of the year, trailing the broader S&P 500 index .SPX, which is down 4 percent in the same period.

On Wednesday, market researcher Gartner said it expects global PC shipments to rise 22 percent this year, up from its March forecast of 20 percent, driven by strong consumer demand and companies replacing aging computers. [nN26206972]

Microsoft is expected to be a key beneficiary of this growth, given its operating system runs on more than 90 percent of the world's personal computers.

"We believe we are in the early stages of the corporate PC cycle refresh that should provide a boost to the company's flagship desktop offerings," analyst David Hilal said in a note to clients.

Microsoft desktop products include Windows 7, the latest version of its operating system, and the Office 2010 software suite.

The upgrade comes a day after rival Apple Inc (AAPL.O) overtook Microsoft to become the world's biggest technology company based on market value. [nN26182337]

Microsoft shares were up 58 cents at $25.59 in trading before the opening bell.

(Reporting by S. John Tilak in Bangalore;)

((john.tilak@thomsonreuters.com; +1 646 223 8780; outside U.S. +91 80 4135 5800 +1 646 897 1898; Reuters Messaging: john.tilak.reuters.com@reuters.net)) Keywords: MICROSOFT/RESEARCH FBR

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