Microsoft pares gains amid tech selloff; sell-side generally upbeat


With equities getting routed today, Microsoft (MSFT +2.9%) has given back a chunk of the AH gains it saw following yesterday's FQ2 beat, but is still soundly outperforming.

By and large, the sell-side is pleased with Microsoft's enterprise strength, hardware sales, and cost controls. Credit Suisse has upped its PT to $42.50 from $40, while predicting Windows profitability and growth will improve in the next two quarters. It also expects Azure/Office 365 will generate "meaningfully higher" lifetime sales and profits than traditional licenses, in spite of near-term revenue cannibalization.

Jefferies is reiterating a Buy and $42 PT, and sees the "option value" on the Windows business (expected by the firm to decline 7.5%/year perpetually) rising following better-than-feared FQ2 numbers. But Goldman, which has been bearish since April, thinks FY14/FY15 estimates will keep dropping.

On the CC (transcript), CFO Amy Hood stated the macro environment is "a little better than [Microsoft] thought," and that enterprise Windows sales are benefiting both from Win. 7 upgrades and a shift towards more costly enterprise SKUs.

She also mentioned Microsoft was able to beat gross margin expectations in spite of a larger hardware mix by lowering costs in other areas, and claimed share gains in database (SQL Server) and systems management software (System Center).

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Comments (10)
  • omarbradley
    , contributor
    Comments (966) | Send Message
     
    they should make a bid for Quicken in my view.
    24 Jan 2014, 12:34 PM Reply Like
  • june1234
    , contributor
    Comments (4348) | Send Message
     
    Leave it to MS to slap the failed RT into it's new and improved surface 2 that replaces the failed surface and make lots of $$$ doing it proving nobody ever went broke underestimating the intelligence of the American consumer.
    24 Jan 2014, 12:58 PM Reply Like
  • Ashraf Eassa
    , contributor
    Comments (9709) | Send Message
     
    Uh, Microsoft LOST money on all of its Surfaces.
    24 Jan 2014, 01:55 PM Reply Like
  • toneroner
    , contributor
    Comments (288) | Send Message
     
    with 84 billion in cash holdings ... wouldn't some losses help with corporate taxes...( I don't really know) As a sole owner small business operator it does help mine
    24 Jan 2014, 04:55 PM Reply Like
  • Dennis Baker
    , contributor
    Comments (2130) | Send Message
     
    Huh? As Ashraf said, it cost them $930 million to sell $890 million worth of Surface tablets.
    26 Jan 2014, 12:01 AM Reply Like
  • wil3714
    , contributor
    Comments (2273) | Send Message
     
    Wow really and Xbox barely making any money is also a lost cause? This is just one quarter

     

    Just you pointing out the fact shows how petty you are on how you want to be right.
    26 Jan 2014, 01:10 AM Reply Like
  • Dennis Baker
    , contributor
    Comments (2130) | Send Message
     
    If it were just one quarter you might have an interesting point.

     

    This is something Microsoft hasn't gotten right in 15+ years of trying.

     

    Microsoft Bob was foreshadowing of things to come. Microsoft just don't get mobile or consumer computing. Windows CE, Windows Mobile, Zune, Windows Phone 7, Surface, Surface RT, Windows 8... it's an seemingly endless congo-line of consumer computing failure.
    26 Jan 2014, 01:25 AM Reply Like
  • wil3714
    , contributor
    Comments (2273) | Send Message
     
    LOL wow really exactly what I mean petty, just wait to be right.

     

    Thats old news but other have pointed out that its ok to fail because those failures also opened up opportunities in its voice recognition, motion sensor, biometric technology in its failed products or R&D.

     

    You only look at the surface and not the whole picture, have some foresight and not follow the headlines or the crowd, think for yourself.
    26 Jan 2014, 01:47 AM Reply Like
  • Dennis Baker
    , contributor
    Comments (2130) | Send Message
     
    I don't even get your point. You're suggesting you are taking the higher ground by being wrong? Is this some kind of weird reverse psychology thing?

     

    Foresight involves looking at the past and extrapolating it to the future, not putting on blinders and operating on faith. Microsoft is very good at a lot of things. They are also very bad at a some things. History tells us which they are good at and which they are bad at.
    26 Jan 2014, 02:03 AM Reply Like
  • wil3714
    , contributor
    Comments (2273) | Send Message
     
    Yet they have 20 products that generate $1B+ each

     

    Any Surface sold is an unsold IPad which counters PC dead story which has showed a turnaround q/q.
    26 Jan 2014, 06:31 AM Reply Like
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