Jul. 16, 2014, 1:00 PM
- Microsoft (MSFT +3.4%) has surged to new post-Dot.com bubble highs following Intel's Q2 results and multiple reports pointing to big layoffs in the wake of Satya Nadella's memo.
- In addition to beating Q2 estimates, Intel provided strong Q3 and full-year guidance, and respectively reported 6% and 19% Y/Y sales increases for its PC and server CPU reporting segments. On its CC, Intel noted it's seeing "clear signs" of a business PC refresh cycle, while adding consumer/emerging markets PC demand remains soft.
- Intel's cloud, HPC, and enterprise server-related sales each rose over 15% Y/Y. The upcoming launch of Intel's Grantley Xeon CPUs is expected to provide a boost to server demand, as is Microsoft's plan to end Windows Server 2003 support by July 2015. A shift in spend towards Internet companies using cheap white-label hardware (often running on Linux) remains a headwind.
- The layoff reports suggest roughly 1/5 of the Finnish workers that joined Microsoft via the Nokia deal will be cut loose. Look for details to be provided during the July 22 FQ4 CC.
Jul. 15, 2014, 10:51 AM
- As part of their longstanding alliance, Cisco (CSCO - unchanged) and Microsoft (MSFT +0.1%) have signed a new 3-year "go-to-market plan" featuring tech integration and sales/marketing partnerships for a slew of data center products.
- On Cisco's side, the products covered include its Nexus data center switches and UCS servers - two bright spots for the company. On Microsoft's site, they include Windows Server, SQL Server, System Center, and Azure.
- The deal, which comes amid Microsoft's partner conference (previous), also features a program to migrate Windows Server 2003 clients to UCS systems running Windows Server 2012 R2. Nonetheless, Microsoft and Cisco remain rivals in the unified communications software space.
- Separately, the WSJ reports Microsoft is close to buying Aorato, an Israeli developer of cybersecurity/identity-protection software, for $200M.
- Aorato's products analyze interactions with Microsoft's Active Directory (enterprise authentication/ID management) service to detect suspicious activity, and prevent unauthorized access to IT resources.
- The report follows the launch of an Azure identity/access management service in March, and comes amid a flurry of cybersecurity M&A activity.
Jun. 12, 2014, 4:26 PM
- Citing stronger-than-expected business PC demand, Intel (INTC) now expects Q2 revenue of $13.4B-$14B, better than prior guidance of $12.5B-$13.5B and a $13B consensus.
- Moreover, the chip giant now expects "some revenue growth" for the whole of 2014, after previously guiding for flat sales; the consensus is for 0.7% growth.
- Full-year R&D/MG&A spending guidance has been upped by $300M to $19B-$19.4B.
- The guidance hike follows several quarters of narrowing PC shipment declines, thanks in large part to healthy corporate demand. Windows 7 system purchases tied to Microsoft's decision to end Windows XP support have played a key role.
- Other PC industry names are up in sympathy: MSFT +1% AH. AMD +1.4%. HPQ +0.8%. NVDA +0.7%.
Apr. 25, 2014, 8:27 AM
- "Beginning this summer, content from AOL brands like HuffPost Live, TechCrunch and Moviefone, as well as partner sites including ESPN, TMZ, Rachel Ray and Martha Stewart will be available on MSN and Bing Apps for Windows and Windows Phone helping both companies provide consumers with the best possible experience."
- "The AOL video library will include content from all 15 AOL On channels and its 2014 slate of original series that will be unveiled next week at the Digital Content NewFronts."
- AOL Video President Ran Harnevo: "The sheer scale of Microsoft’s (MSFT) network will help us reach a massive new audience and continue our climb.”
- AOL +1.8% premarket
- Source: Press Release
Apr. 24, 2014, 4:24 PM
- Microsoft's (MSFT) Commercial revenue grew 7% Y/Y in FQ3 to $12.7B, a little below FQ2's 10% clip. Devices & Consumer revenue grew 12% to $8.3B after growing 13% in FQ2.
- Commercial Licensing (50% of revenue, 65% of gross profit) sales +10% vs. +7%, with Windows volume licensing up 11% and and key server productivity offerings (Lync, SharePoint, Exchange) collectively growing double-digits.
- Commercial Other +31% vs. +28%; 100% and 150% respective increases for Office 365 and Azure fueled the growth. The division is now nearly 10% of revenue, but still makes up less than 4% of gross profit (lower cloud margins).
- D&C licensing rose 1% after falling 6% in FQ2, thanks in part to stabilizing PC sales; Windows OEM revenue rose 4%.
- D&C hardware +41% (thanks to Xbox One sales) ahead of the Nokia deal's closing; Surface revenue totaled just $500M. D&C Other +18%; Office 365 Home added almost 1M subs, raising its total base to 4.4M.
- Drops in sales/marketing and G&A spend led opex to fall 7% Y/Y to $7.49B. That boosted EPS, as did $1.8B in buybacks.
- Satya Nadella hosts his first CC at 5:30PM ET, guidance will be provided.
- MSFT +2% AH. FQ3 results, PR.
Apr. 24, 2014, 4:05 PM| 2 Comments
Apr. 17, 2014, 12:01 PM
- IBM soundly missed revenue estimates for yet another quarter, thanks in large part to a 23% Y/Y drop in hardware/chip sales, and also reported a $3B Y/Y drop for its services backlog. SAP missed Q1 estimates due to a mixture of forex pressure and light software license revenue.
- Microsoft (MSFT -1.4%), whose enterprise software ops compete against both IBM (middleware, databases, developer tools) and SAP (ERP/CRM apps, databases), is trading lower. As is IBM archrival H-P (HPQ -2.6%).
- A few enterprise cloud software vendors, some of whom compete against SAP, are also off: JIVE -3.5%. N -2%. VEEV -1.9%. MKTO -2.2%.
Apr. 8, 2014, 9:18 AM
- The Chinese government's approval of Microsoft's (MSFT) acquisition of Nokia's (NOK) phone unit follows approvals from U.S. and EU regulators.
- Investors appear pleased regulators didn't set tough patent-licensing conditions on Nokia. Like the EU, Chinese OEMs had expressed concerns Nokia will now get more aggressive with its licensing efforts, given it will no longer have a phone unit needing cross-licenses. Nokia says it has promised to honor FRAND licensing principles (widely supported in the industry).
- Microsoft and Nokia have said they expect the deal to close this month, after originally setting a March timetable. Tax disputes with Indian authorities remain outstanding.
Mar. 28, 2014, 1:03 PM
- "It was encouraging to have the CEO of Microsoft (MSFT +2.8%) visible in a product strategy discussion, laying out in a transparent way the strategic direction of the company that embraces where users are going ... and breaking away from the Windows and PC-centric focus of the past," writes Nomura's Rick Sherlund, praising yesterday's product announcements.
- Apple uber-fan MG Siegler also likes what he sees. "Microsoft could have released Office [for the iPad] much much much much much sooner. They chose not to. Steve Ballmer chose not to ... I believe Satya Nadella has already put Microsoft in a better place than it has been in years."
- The apps, free in read-only mode, have quickly moved to the top of iPad download charts. Though criticizing a few feature omissions (such as printing support, due in an update), reviewers (I, II, III) have praised the apps' editing tools, touch optimizations, and cloud integration.
- Also of note: 1) Microsoft has made the full versions of its iOS/Android Office smartphone apps completely free for home use, and is promising Android tablet apps are on the way. 2) Though doing so requires giving Apple a 30% cut, Microsoft is allowing free iPad users to upgrade to Office 365 from their devices. Few enterprises are likely to subscribe using an iPad, but some consumers/SMBs might.
- Yesterday: Office iPad apps launched, mobility suite detailed
Mar. 18, 2014, 11:21 AM
- Microsoft's (MSFT +4.1%) reported plans to unveil Office iPad apps on March 27 are not only "directionally positive" for driving Office 365 demand, but are likely part of a broader effort by Satya Nadella to reposition Microsoft as a "mobile first/cloud first company" thinks Nomura's Rick Sherlund, bullish as ever.
- Shares have made new post-Dot.com bubble highs, and are within striking distance of $40.
- The iPad accounted for roughly a third of Q4 tablet shipments, but (from all indications) its enterprise share is much higher. ZDNet's Mary Jo Foley observes the iPad Office apps appear set to arrive before Microsoft's touch-friendly Gemini Office Windows apps (expected later this year).
- Separately, Xbox chief product officer and long-time Xbox Live chief Marc Whitten has announced he's leaving to become the product chief of home audio system maker Sonos. Xbox division chief Don Mattrick left last year to become the CEO of Zynga, and another key Xbox exec, Blair Westlake, departed in January in response to the 2013 reorg.
Feb. 12, 2014, 10:55 AM
- By imposing conditions Nokia (NOK -2.6%) deems to be "unacceptable," an Indian court has halted the transfer of Nokia's massive Chennai phone manufacturing plant (employs 30K people) to Microsoft (MSFT +0.9%), and in doing so has further stalled the sale of the former's phone unit to the latter.
- The halt is tied to Nokia's ongoing $1.1B tax dispute with the Indian government. Nokia has responded by appealing to India's Supreme Court. In the meantime, chairman Risto Siilasmaa is meeting with government figures in an attempt to find a resolution.
- Nokia, whose shares are selling off today, once more suggests (previous) its Indian manufacturing ops could be moved elsewhere on account of the dispute. "It seems that working with the tax authorities here in India can be very hard and unpredictable, which is clearly not good for businesses."
- Previous: Indian court lifts freeze on Nokia factory
- Update: Nokia says it doesn't expect the tax dispute to stop the Microsoft deal from closing in Q1.
Jan. 24, 2014, 12:32 PM
- 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).
- More on Microsoft's FQ2
Jan. 23, 2014, 5:36 PM
Jan. 23, 2014, 4:05 PM| 12 Comments
Jan. 17, 2014, 11:37 AM
- Intel's (INTC -3.6%) partial blaming of weaker-than-expected Q4 server CPU division sales (revenue +8% Y/Y, but volumes only +1% Y/Y and -3% Q/Q) on a government shutdown comes across as a "bad excuse," thinks FBR.
- Though reiterating an Outperform, FBR is skeptical about Intel's long-term 15% revenue CAGR target for its server CPU division. Bernstein questioned the division's growth outlook yesterday afternoon.
- Goldman, reiterating a Sell (previous), says Intel's numbers "confirm our view that there is downside, not upside, to Intel's 2014 EPS." It's worried about both server CPU sales and a softening corporate PC upgrade cycle (driven by the Windows 7 transition) following Q1.
- JPMorgan, which upgraded Intel going into earnings, is defending the company. It's pleased with stabilizing PC demand and dismisses server concerns, given sales have historically been volatile.
- A major headwind faced by Intel's server CPU unit: Server industry revenues have been steadily declining, as demand shifts towards Web/cloud service providers with bigger economies of scale and a penchant for using cheap white-label hardware. IDC estimates total server sales fell 3.7% Y/Y in Q3, and that x86 server sales rose just 2.8%.
- Microsoft (MSFT -1.6%) and AMD (AMD -1.1%) are ticking lower following Intel's report. So are server virtualization kingpin VMware (VMW -1.9%), parent EMC (EMC -0.9%), and rival Citrix (CTXS -0.8%). Intel suggested on its CC virtualization growth is softening.
- More on Intel's Q4, CC transcript
Jan. 14, 2014, 5:42 PM
- PC industry names outperformed amid a broader tech rally, aided by a JPMorgan Intel (INTC +4%) note that argued PC demand is stabilizing, and tablet cannibalization diminishing. A number of chip stocks also rallied strongly (SOXX +2.1%).
- Also: Major hard drive suspension assembly maker Hutchinson has reported above-consensus Dec. quarter sales, while citing strong demand for 2.5" notebook drive assemblies. Seagate and Western Digital both rallied.
- JPMorgan's Christopher Danely, who upgraded Intel to Overweight, has raised his 2014 estimates soundly above consensus ahead of the chip giant's Thursday Q4 report. Danely notes Intel, Microsoft, H-P, and others have said PC demand is improving, and that Taiwan's big-4 notebook contract manufacturers collectively grew their shipments 7% Q/Q in Q4. Q1 shipments are expected to drop in-line with seasonality.
- He also points out tablet shipment growth is decelerating, and forecasts shipments will only rise 25% in 2014 (down from 53% in 2013).
- Danely's optimism contrasts with another bearish Intel note from Bernstein's Stacy Rasgon, who estimates five mobile CPU sales are needed to make up for one PC CPU sale, and doubts Intel's foundry business will move the needle.
- PC industry gainers: MSFT +2.3%. HPQ +2.6%. AMD +4.1%. NVDA +3.1%.
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
- Previous: Goldman on Intel's Q4, Gartner/IDC's Q4 PC estimates, Intel's light 2014 guidance
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