• Bloomberg/Businessweek, et al, Monday, October 4, 2010 1:30 PM

As the launch of Windows Phone 7 looms, Goldman Sachs has downgraded Microsoft shares to "neutral," citing its ongoing mobile woes.

"Microsoft has struggled to match mobile offerings from rivals including Apple Inc. and Google Inc.," writes Bloomberg/Businessweek. "Redmond, Washington-based Microsoft has yet to release a tablet computer to compete with Apple's iPad, 3 million of which were sold in the first 80 days of its release."

"Microsoft was removed from the bank's Americas Buy List, with a price target of $28 rather than $32," Goldman Sachs analysts, including Sarah Friar, wrote in a note to clients.

The company needs to win "a firmer foothold in the growing migration to mobile devices" in order to improve investor sentiment, they wrote.

"This is just one more sign that Microsoft could use a vision overhaul," writes Computerworld, noting that Goldman is also suggesting that Microsoft separate its consumer and enterprise businesses.

Yet, a rebound by Microsoft is unlikely this year since "Apple's iPad and iPhone plus Google's Android operating system are well established," the Goldman analysts wrote.

A successful turnaround will require more than just mobile success, according to Goldman, which suggests that Microsoft also increase its dividend, improve its consumer products, and corner Cloud computing.

"Oh, that's all?" asks Infectious Greed's Paul Kedrosky. "Just a giant increase in the dividend, a coherent strategy in a segment of the market that has had Microsoft bolloxed for more than a decade, and leadership in a new segment dominated by nimbler startups?"

"Pulling this off would be like Microsoft learning Geller-ian magic tricks," adds Kedrosky. "The equivalent of being able to bend spoons with its brain."

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