Microsoft slumps as capex guidance, new reporting structure digested


Pac Crest (Sector Perform), reviewing yesterday's analyst day: "Microsoft (MSFT -2.4%) could not answer investors’ most pressing question ... Will Microsoft’s board allow a new CEO to fundamentally restructure the company?" The firm is also disappointed there management gave no sign it will do a breakup anytime soon. Calls for a breakup have grown lately.

Morgan Stanley (Equal Weight) points out Microsoft is guiding for FY14 capex of $6.5B, up 51% from FY13's $4.3B and above the firm's estimate of $5.6B. Microsoft attributes the spending ramp to cloud services (Azure, Xbox Live, Office 365) needs. The firm is, however, pleased with the rapid FY13 growth reported for Office 365 seats (+350%), Azure (+200%), and cloud CRM software (+80%).

Citi (Buy) had only been expecting FY14 capex guidance of $4.8B. But it likes Microsoft's new reporting structure, arguing it will "give more clear visibility into consumer vs commercial revenue and profit contribution."

Analyst day details: I, II, III

Presentation slides/transcripts

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