"Our recent upgrade was based on the transition to the cloud, transparency for the 'BestCo' commercial assets and optionality on assumed low intrinsic value for Windows ... F1Q14 was positive for all these trends," writes Jefferies' Ross MacMillan, gloating about his recent bullish call on Microsoft (MSFT +6.6%) in the wake of the FQ1 beat. Nonetheless, he's slightly lowering his EPS estimates due to margin pressure related to the Xbox One launch.
Microsoft's Windows OEM "Pro" (enterprise) revenue rose 6% YY in FQ1, while "non-Pro" (consumer) revenue fell 22% (17% exc. China), several points better than expected.
On its earnings call (transcript), Microsoft guided for Devices & Consumer licensing revenue of $5.2B-$5.4B for seasonally strong FQ2. Business PC demand is expected to be steady, but consumer demand will be"subject to more volatility." Hardware revenue is expected to rise 35%-45% Y/Y to $3.8B-$4.1B, aided by the Xbox One launch.
Microsoft's total commercial revenue is expected to grow 9%-11%, on par with FQ2. Commercial licensing revenue is expected to come in at $10.7B-$10.9B, and Commercial Other revenue (inc. Azure and Office 365) is expected to grow to $1.7B-$1.9B from FQ1's $1.6B. Opex is expected to rise 6%-8% Y/Y.