Wed, Jul. 22, 3:07 PM
- Microsoft (NASDAQ:MSFT) hasn't seen any upgrades/downgrades after beating FQ4 estimates, reporting strong cloud growth and major Windows/traditional Office declines, and once more providing conservative guidance. A handful of firms have tweaked their targets.
- Bernstein's Mark Moerdler (Outperform), among Microsoft's defenders, notes the commercial cloud annual run rate ($8B) rose 27% Q/Q, and that cloud margins also improved. "We estimate that the Gross Margin for each incremental dollar of revenue, given the current mix of SaaS, PaaS, and IaaS is at a minimum~70%, if not greater, with long term SaaS margins of 86%+ and Azure margins equivalent to Amazon’s at similar scale."
- Credit Suisse's Philip Winslow (Outperform): "We believe Microsoft can return to double-digit EPS growth by (1) continued rationalization of its cost structure, (2) further divestitures/exits of non-core businesses, (3) optimization of its capital structure, (4) stabilization in Windows pricing, and (5) an accelerated shift to Office 365 ... Furthermore, we believe that Microsoft Azure will emerge as the clear #2 market share player in public IaaS [behind Amazon] and will arise as the leader in public PaaS.”
- Cowen's Tim Arcuri notes Microsoft's Devices & Consumer licensing guidance (covers Windows OEM and traditional consumer Office licensing, as well as Android royalties) implies ~9.4% Q/Q growth, which in turn points to a healthy (Windows 10-driven) rebound in PC demand. D&C licensing was down 34% Y/Y in FQ4 to $1.7B, thanks to Windows/Office declines and the end of Nokia payments.
- Raymond James' Michael Turtis (Market Perform) is worried about slumping commercial on-premise software sales. "Commercial license $10,451 million (-7%) missed consensus $10,550 million (-6%), guidance $10.5-10.6 billion on both Office and Server weakness, with Server decelerating to 5% CC from F3Q’s +13% ... Commercial license billings declined 12% y/y, below revenue decline of -7%, though some of this could be transition to cloud ... We reduced our [FY16] estimates across product categories given the broader slow down and took down our Server product estimates given persistent forex impact and, possibly, the first signs of broader cannibalization of Server by Azure cloud."
- Prior Microsoft coverage, CC transcript
Tue, Jul. 21, 7:38 PM
- Microsoft (NASDAQ:MSFT) guides on its FQ4 CC for its various reporting segments to collectively see FQ1 revenue of $20.7B-$21.3B, below a $22.8B consensus. The company has been guiding cautiously for several quarters.
- Forex is expected to have a 5% impact on FQ1 and FQ2 sales growth. Microsoft promises "Windows 10 momentum" will provide a lift during the second half of FY16 (ends June '16), and that Bing (responsible for major losses in past years) will turn profitable during the year. In the wake of the company's latest job cut announcement, FY16 operating expense guidance has been cut to $32.1B-$32.4B. The tax rate is expected to be at 24% (+/- 1%).
- Ahead of the job cuts and the related narrowing of Microsoft's phone efforts, phone revenue fell 38% Y/Y to $1.23B (feature phone decline), with a negative gross margin. Lumia units rose 10% to 8.4M, but Lumia revenue fell due to a lower ASP.
- Also: 1) Though revenue fell 5% Y/Y, the unearned revenue balance rose 1% Y/Y to $25.3B, and the contracted but not billed balance rose by ~$500M to $24.5B. 2) Office 365 consumer subs rose by nearly 3M Q/Q to 15.2M; traditional Office consumer revenue fell 42%. 3) Xbox shipments rose 30% to 1.4M. 4) Azure revenue and compute usage rose by triple digits Y/Y, and enterprise mobility management (EMM) software customers rose by nearly 90% to 17K+. 5) FQ4 capex totaled $1.7B.
- Microsoft is down to $45.38 in AH trading, maintaining the losses seen after the FQ4 report was published.
- FQ4 results, details, guidance (.ppt), earnings slides (.ppt)
Tue, Jul. 21, 4:26 PM
- Thanks to weak PC sales and declining Nokia-unit phone shipments, Microsoft's (NASDAQ:MSFT) Devices & Consumer revenue fell 13% Y/Y in FQ4 to $8.7B. Commercial revenue rose fractionally to $13.5B, with cloud services and server software growth offsetting Windows and (on-premise) Office declines. Forex had a 3% impact on total revenue growth.
- Windows OEM revenue fell 22% Y/Y, and Windows volume licensing revenue fell 8%. Surface revenue +117% to $888M; Xbox revenue +27; search ads +21%.
- Server products/services +4% Y/Y; commercial cloud (Office 365/Azure/Dynamics Online) +88%; Office Commercial -4%. Commercial cloud now on an $8B/year run rate.
- Thanks to job cuts and forex, R&D/SG&A spend (non-GAAP) fell 9% to $8.33B. $4.3B was spent on buybacks.
- Microsoft has dropped to $45.74 AH. CC at 5:30PM ET (webcast), guidance will be provided.
- FQ1 results, PR
Tue, Jul. 21, 4:07 PM
Mon, Jul. 20, 5:30 PM
Fri, Apr. 24, 2:32 PM
- "By calendar 2016, we believe organic [constant currency] growth returns to low single digits with growing cloud business and earnings growth can potentially be restored to 10% or so with the leverage of share repurchase, and continued strong cash flow generation," writes Nomura's Rick Sherlund, upgrading Microsoft (NASDAQ:MSFT) to Buy following its FQ3 beat. His target remains at $50.
- Sherlund, who downgraded in January on account of Microsoft's FQ2 numbers, still thinks the company will be in a transition period for a few quarters, and notes certain core businesses (e.g. Windows, traditional Office licenses) were soft. However, he thinks total Office revenue (traditional + 365) could start rising again in 2016 "given high interest and migrations among business users to Office 365 and new cross platform productivity tools for Windows, iOS and Android."
- "In our view, Microsoft is well ahead of its large cap value peer group in the transition to the cloud," says UBS' Brent Thill (Buy, $50 target). Pac Crest's Brendan Barnicle (Outperform, $50 target) observes Office 365 still covers less than 10% of the Office installed base, leaving plenty of room for growth. He estimates Azure is on a $1.5B/year revenue rate (compares with $5.16B in trailing revenue for AWS and a $6.3B/year run rate for Microsoft's broader commercial cloud ops).
- On the CC (transcript), CFO Amy Hood stated Microsoft's FY15 (ends in June) opex guidance ($32.4B-$32.5B) is now $2B lower than where it initially was. Adjusting for forex and the Nokia deal, opex rose just 1% Y/Y in FQ3 thanks to job cuts. Meanwhile, Satya Nadella mentioned Office iOS/Android app downloads have topped 100M.
- Prior Microsoft earnings coverage
Thu, Apr. 23, 6:57 PM
- Continuing its habit of guiding cautiously, Microsoft (NASDAQ:MSFT) has guided (.ppt) on its FQ3 CC for its various business units to have FQ4 revenue of $21.6B-$22.3B, below a $22.7B consensus. Corporate/other revenue (-$20M in FQ3, $314M in FQ2) isn't included in the forecast.
- Forex is expected to have a 4% impact on FQ4 revenue growth, up from 3% in FQ3. The unearned revenue balance ($20.2B at the end of FQ3, +4% Y/Y) is expected to rise Q/Q, in-line with seasonality save for forex.
- In its earnings slides (.ppt), Microsoft notes Office consumer revenue fell 41% Y/Y. 27% of the decline is attributed to the transition to Office 365 subscriptions from up-front licenses, and the rest to weak Japanese sales (they were strong a year ago ahead of a tax hike). "Windows Phone" revenue (includes Android royalties) fell 19% thanks to a mix shift towards low-royalty phones.
- Xbox platform revenue fell 24% due to lower Xbox One sales and a mix shift towards cheaper models. Lumia phone sales (8.6M) were up 18% Y/Y; 24.7M non-Lumia phones were sold (down Y/Y).
- Premium versions of Windows Server, System Center, and SQL Server were a strong point: Their collective sales rose 25% ahead of the July end of Windows Server 2003 support. Microsoft also reports Azure compute usage more than doubled (Azure revenue isn't broken out), and that enterprise mobility (EMM) customers rose over 70% to more than 13K; Microsoft launched an EMM suite last May.
- Microsoft is now at $45.10 AH. FQ3 results, details, PR.
Thu, Apr. 23, 4:54 PM
- In spite of 2% Y/Y drops in Windows volume license and Office commercial sales - the latter is hurt by the shift to Office 365 subscriptions from up-front licenses, which pushes out revenue recognition - Microsoft's (NASDAQ:MSFT) Commercial revenue rose 5% Y/Y in FQ3 to $12.8B, even with FQ2's pace and helping revenue/EPS beat estimates. A 12% increase in server product/services revenue (improved from FQ2's 9%) contributed, as did a 106% increase in commercial cloud revenue (nearly even with FQ2's 114%).
- As expected, Windows OEM license revenue (hurt by both weak PC sales and discounts for smaller/cheaper devices) was soft: OEM Pro revenue fell 19% and non-Pro revenue 26%.
- Also as expected: Forex took a toll on sales. GAAP revenue growth (boosted by the Nokia deal) was 9% Y/Y in constant currency vs. 6% in actual dollars.
- Surface revenue rose 44% to $713M. Phone hardware revenue totaled $1.4B, with 8.6M Lumias sold (10.5M were sold in seasonally strong FQ2). Search ad revenue rose 21% (no dollar amount is given). Commercial cloud revenue is now on a $6.3B/year run rate, up from $5.5B a quarter ago. Consumer Office 365 subs rose by 3.2M Q/Q to over 12.4M.
- $5.1B was spent on buybacks, giving a lift to EPS. While revenue rose 6%, gross profit (affected by high capex and a shift towards hardware and cloud revenue) rose only 1%. Microsoft ended FQ3 with $95.4B in cash/short-term investments (much of it offshore), and $29.3B in debt.
- Shares have risen to $44.65 AH. FQ3 results, PR.
Thu, Apr. 23, 4:11 PM
Wed, Apr. 22, 5:35 PM
- ACTG, ALGN, ALTR, AMZN, AWAY, BAS, BCR, BGS, BJRI, BLDR, CB, CBI, COF, CPHD, CVTI, CYN, DGII, DV, EFII, ELY, ETFC, ETH, FET, FICO, FII, FR, FSL, GHL, GIMO, GOOG, HA, HBHC, HBI, HUBG, HWAY, JNPR, KLAC, KN, LSTR, MKTO, MMSI, MSCC, MSFT, MTSN, MXIM, MXWL, N, NEM, NTGR, P, PEB, PFG, QDEL, QLIK, RGA, RHI, RMD, RSG, SBAC, SBUX, SFG, SHOR, SIVB, SPNC, SRCL, SWN, SYA, SYNA, TRN, UIS, VCRA, VRSN, WIRE, WRE
Thu, Mar. 12, 9:17 AM
- Intel (NASDAQ:INTC) now expects Q1 revenue of $12.5B-$13.1B, below prior guidance of $13.2B-$14.2B and a $13.7B consensus. Gross margin guidance remains at 60% (+/- 2%), with lower volumes offset by higher ASPs.
- "All other expectations" have been withdrawn - that presumably includes full-year guidance for mid-single digit revenue growth. Guidance will be updated during Intel's April 14 Q1 report.
- The chip giant blames the warning on "weaker than expected demand for business desktop PCs and lower than expected inventory levels across the PC supply chain." In particular, it thinks "lower than expected Windows XP* refresh in small and medium business and increasingly challenging macroeconomic and currency conditions, particularly in Europe," are taking a toll on sales. Server CPU division sales are "meeting expectations."
- Other PC-exposed names are following Intel lower: Microsoft (NASDAQ:MSFT) -2.4% premarket, AMD -2.8%, Nvidia (NASDAQ:NVDA) -2.5%, HP (NYSE:HPQ) -2.3%, Seagate (NASDAQ:STX) -2.5%, Western Digital (NASDAQ:WDC) -2.7%, Micron (NASDAQ:MU) -3.6%.
- Update (11:35AM ET): While Intel is still down over 4%, Micron and Seagate have turned positive, and HP is close to breakeven. Microsoft, Nvidia, and Western Digital have pared their losses, but remain lower.
Wed, Feb. 18, 12:15 PM
- Down AH yesterday due to the light sales guidance provided with its mixed Q4 results, Rackspace (RAX +1.4%) is now back above $50. Helping its cause: Pac Crest has upgraded to Outperform, and at least four firms have hiked their targets.
- Pac Crest cites enterprise and OpenStack momentum as reasons for upgrading: "In the second half of 2014, Rackspace won more large enterprise contracts worth at least $100,000 per month than it had in the prior five quarters combined ... management indicated that OpenStack now makes up more than 50% of its public cloud revenue, which implies OpenStack revenue is at least 15.6% of its total revenue."
- Cowen (target hiked to $75) now considers it likely Rackspace "will announce support for a mega cloud provider in 1H15," thereby boosting its long-term addressable market and lowering future capex needs (in exchange for sharing revenue). It adds sales guidance was in-line after adjusting for forex, and that EBITDA margin guidance was better than expected.
- Meanwhile, new CEO Taylor Rhodes argues the cloud infrastructure (IaaS) market's price war is calming down. "Amazon Web Services (NASDAQ:AMZN) in November, for the first time, didn’t make a price cut move ... AWS is feeling like they are the reference brand leader, that they are strong versus Google (NASDAQ:GOOG), so they don’t need to do it as much. Microsoft (NASDAQ:MSFT) is cutting price, but who knows how much share they are actually taking."
- He also reiterates Rackspace's assertion that its OpenStack/hybrid cloud offerings are differentiated in the battle for enterprise accounts. "The mainstream market has two problems: They have legacy apps that won’t go [to multi-tenant public clouds] automatically ... the second problem they have is this skills set gap ... There is a need for software and tools development."
- Q4 results, guidance/details
Mon, Jan. 26, 6:42 PM
- Microsoft (NASDAQ:MSFT) guides (.ppt) for its reporting units to collectively have FQ3 revenue of $20.6B-$21.4B, below a $23.8B total revenue consensus. Corporate/other revenue, which totaled $314M in FQ2, isn't included in the guidance. Forex is expected to hurt revenue growth by ~4%.
- Full-year operating expense guidance has been cut by $1B to $33.2B-$33.6B. Another $200M worth of restructuring charges are expected over the rest of FY15 (ends June '15), yielding total charges of $1.4B. FY15 tax rate guidance is at 22%-24%; the FQ2 tax rate was 25%.
- In its earnings slides (.ppt), Microsoft states its unearned revenue balance was $21.2B at the end of FQ2, +9% Y/Y but slightly below historical seasonality due to forex and the recognition of $300M worth of prior period deferrals. The contracted but not billed balance was above $24B.
- Office 365 consumer subs rose by 30% Q/Q to 9.2M, and first-party game revenue (boosted by the Mojang acquisition) rose 79%. Though Microsoft is in the midst of paring back its feature phone ops 39.7M non-Lumia phones were still sold (to go with 10.5M Lumias).
- $1.5B was spent on capex during the quarter. Capex is expected to rise Q/Q in FQ3 due to cloud investments. Excluding the Nokia deal, opex fell 8% Y/Y (+1% otherwise).
- MSFT -4.3% AH to $44.99. FQ2 results, details.
Mon, Jan. 26, 4:42 PM
- Microsoft's (NASDAQ:MSFT) Window OEM Pro and non-Pro revenue both fell 13% Y/Y in FQ2. The Pro slowdown is blamed on slowing business PC sales, academic discounts, and "mix returning to pre-Windows XP end of support levels." The non-Pro decline is due to unit growth coming from cheaper hardware that Microsoft is providing discounted license fees for. Commercial Windows volume license revenue rose 3%.
- Total Commercial revenue rose 5% Y/Y in FQ2 to $13.3B, helping drive the revenue beat. Devices & Consumer revenue (lifted by the Nokia deal) rose 8% to $12.9B. Commercial reporting segments accounted for over 2/3 of FQ2 gross profit of $16.3B.
- Segment performance: Commercial licensing revenue -2% Y/Y to $10.7B (hurt by the cloud shift). Commercial other +46% to $2.6B (boosted by cloud growth). Device/consumer licensing -25% to $4.2B (Windows and Android royalty declines). Computing/gaming hardware -11% to $4B (Xbox One launched a year ago). Phone hardware revenue was $2.3B, above guidance of $2B-$2.2B but down from FQ1's $2.6B (feature phone decline).
- Highlights: 1) Commercial cloud revenue (Office 365, Azure, Dynamics online) +114% Y/Y, and now on a $5.5B/year run rate 2) 10.5M Lumias and 6.6M Xboxes were sold. Surface revenue +24% to $1.1B. 3) Server products/services +9%, with double-digit SQL Server and System Center growth. 4) Search ad revenue +23%; Bing's U.S. share is at 19.7% (per comScore).
- With Nokia boosting spending levels in spite of last year's job cuts, R&D spend rose 6% to $2.9B, and sales/marketing 7% to $4.3B. G&A, however, fell 8% to $1.1B.
- $2.1B was spent on buybacks. Microsoft plans to complete its existing $40B buyback program (launched in Sep. 2013) by the end of 2016.
- Microsoft is at $45.59 in AH trading. Guidance will be provided on the CC.
- FQ2 results, PR
Mon, Jan. 26, 4:12 PM
Sun, Jan. 25, 5:35 PM
MSFT vs. ETF Alternatives
Other News & PR