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Popular sentiment about Microsoft assumes “an unrealistically bad scenario” for the company’s future, concludes a recent Bernstein Research report. The firm say Microsoft is actually in a good position to manage threats such as tablets and cloud computing and avoid a “doomsday” situation.

The 44-page report delves into the company’s financials and models a variety of possible outcomes for key Microsoft products, coming away with a conclusion contrary to many of the assumptions investors are making about the company.

“Today’s share price implies a scenario in which the company’s core Windows/Server/MBD business never grows again, the Online division bleeds billions of dollars of cash forever, and management destroys value in ill-fated acquisitions and investments,” says the report, led by Bernstein senior analyst Mark Moerdler. “We don’t believe such a dire scenario will play out; and believe potential threats (e.g. tablets, alternative OS’s, cloud) are manageable.”

Bernstein Research says Windows 8's compatibility with existing enterprise apps will boost Microsoft's tablet push.

On the topic of Windows, a key question is how the rise of tablets will impact PCs running Microsoft’s operating system. Bernstein’s report shows tablet shipments exceeding 200 million units by 2014, with some cannibalization of business and consumer PCs. But the firm says it expects most businesses and consumers to buy tablets in addition to Windows PCs, not as replacements for them.

[Previously on GeekWire: Apple’s Tim Cook sees tablets eventually becoming bigger than PC market.]

The Bernstein report notes that much of the growth in PC sales comes from emerging markets, where the analysts expect tablet uptake to be lighter. Bernstein also expects Microsoft’s traditional strength in business platforms to work to its advantage.

“We are encouraged by various Windows 8 features (e.g., backward compatibility, live tiles, Metro Style apps), and believe Windows 8 is a decent competitor in the tablet OS market,” the report says. “We believe Windows 8 tablets would be particularly attractive for business users, due to its compatibility with existing enterprise apps.”

On the other hand, the report notes, apps “may have to be completely re-developed to operate on either Apple iOS or Android. If even a portion of the Windows ecosystem apps migrate to Metro Style, then Windows 8 could launch with more than the games and news apps that are the lion share of both the Apple and Android app stores.”

Microsoft previewed Windows 8 in September and is expected to release a public beta in February. The company hasn’t yet given a final release date for the new operating system.

Moerdler initiated coverage of the global software sector this fall with an “outperform” rating on Microsoft stock. Bernstein’s analysis puts a target price of $33 on Microsoft shares. The company is trading this morning just above $26.

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