Earnings Preview: Microsoft

Microsoft (MSFT) is expected to report Q4 earnings Thursday, July 17, after market close, with a conference call scheduled for 5:30 pm ET.

Guidance

The consensus estimate is 47c for EPS and $15.65B for revenue, according to First Call.

Analyst Views

Friedman Billings believes Microsoft will report solid Q4 results, driven by healthy PC shipments, the continued momentum of Office 2007, recently released server and tools products, the continued momentum of Microsoft Business Division (MBD), and the continuing revenue benefit from a weak dollar. The firm believes there is a good possibility that Microsoft will beat its revenue estimate of $15.7B, as well as its and the consensus EPS estimate of 47c. Friedman thinks Microsoft should be able to meet its estimates for the following divisions: Client Revenue estimate of $4.2B (up 10% YoY); Server and Tools segment estimate of $3.33B (up 19% YoY); Microsoft Business Division (MBD) estimate of $5.3B (up 15% YoY); and Entertainment and Devices division (EDD) estimate of $1.5B. Friedman estimates that overall PC shipment growth should come in at 14% YoY due to healthy shipment growth in April and May. Friedman expects the premium editions of Windows to be in line with the 76% level of the prior quarter. Growth will continue to be driven by strong annuity sales with the recent releases of Windows Server 2008 and Visual Studio 2008 and the upcoming release of SQL Server 2008 in 3Q08. Based on NPD data for April and May, Friedman estimates that Microsoft shipped 1.2M Xbox 360 console shipments in the quarter, which was fairly in line with their expectation.

M&A talks: Following Yahoo!'s (YHOO) rejection of Microsoft's enhanced-search-only offer, Friedman expects Microsoft to wait until after the Yahoo! shareholder meeting before deciding on its next move. It was also announced Wednesday that Microsoft is planning to meet with executives of Time Warner's (TWX) AOL unit to discuss a possible combination between the software giant and AOL.

Next event: Financial analyst meeting on July 24 at 11:30 pm ET.

Comments

[p. smith]

put $10,000 in MSFT now and you could get $12,000 in a year if you are lucky.

put $10,000 in ITWO now and you could get $30,000 in a year with same luck and risk.

[techy]

p.smith...

care to elaborate??

i know for sure that if i put 10k in MSFT, my worst loss maybe 2-3K, what about ITWO?