Microsoft Earnings Preview

Microsoft Corp.'s (NASDAQ:MSFT) Friday morning earnings announcement on the results of its fiscal 2010 first quarter will cap a jam-packed week for the software maker, following the launch of Windows 7, the opening of its first retail stores, the unveiling a revamped online store that sells PCs and a search deal with Twitter Inc. (Twitter struck a similar deal with leading search engine maker Google Inc. (NASDAQ:GOOG)).

Dealmaking milestones in the quarter included finally nailing down a search and advertising deal with Yahoo Inc. (YHOO) after Microsoft's failed attempt to acquire the number two search engine provider last year.

This period also saw the company agreeing to sell Razorfish, the digital advertising agency it acquired when it bought Aquantive Inc. for $6 million in 2007, to Publicis Groupe SA in a cash-and-stock deal valued at $530 million.

Analysts polled by Thomson Reuters expect Microsoft to post a profit of 32 cents per share on $12.37 billion in sales.

"Keep an eye out Friday for Microsoft's unearned revenue, which should shed light on its success in re-signing enterprise clients -- especially in the Business Division, which produces Office," says the SeattlePI, citing an interview with Matt Rosoff, an analyst with the independent firm Directions on Microsoft:

Adjusting for several deals that closed after its financial reporting date, Microsoft said unearned revenue in the fourth quarter of FY2009 was relatively flat compared to the period a year before. Also notable will be whether the Entertainment and Devices Division, which runs Microsoft's Xbox 360 program, is still in the black. And the Online Services Business, which launched the revitalized Bing search engine in June, is unlikely to have turned around in three short months, Rosoff said.

For Microsoft, last week ended with a bang. The New York Times that Saturday published a scathing critique of the company and CEO Steve Ballmer. The story included a particularly memorable quote from Marc Benioff, the CEO of Salesforce.com (NASDAQ:CRM).

"They are trapped in their own psychosis that the world has to revolve around Windows on the PC," said Benioff. "Until they stop doing that, they will drag their company into the gutter."- Mary Kathleen Flynn