Microsoft Earnings Expectations (MSFT)

Microsoft (NASDAQ:MSFT) is set to post earnings after the close, and if they live up to history they will offer some long-term guidance.  Today’s results for the last quarter (Q1 2008) are expected to be $0.39 EPS on $12.57 Billion in revenues.  On last look, First Call has next quarter’s estimates at $0.44 EPS on $15.6 Billion revenues and Fiscal JUN-2008 at $1.73 EPS and $57.4 Billion revenues.

We have been seeing a large decoupling of chips and communications from other technology.  These all tie in and around PC’s in the grand scheme. We have seen continued numbers on PC’s staying high, and Intel and Seagate staying strong on guidance.  The weakness in Corning yesterday wasn’t tied as much to weak screen sales (which we are still questioning) was hard not to notice.  But the indications are for continued strength here in core software sales.  Here are some of the key issues we’ll be watching:

• Halo 3 led to triple Xbox 360 selling of units, but the actual game sales only had a week to be counted in the end of this quarter report ($300 million first week). We may get some more on the Bungie spin-off interpretations.
• A Key issue will be how much aQauntive brings to it, and we’ll be looking at the unified communications initiatives.
• Currency should be a boost too, some say as much as $200 to $250 million (might be a bit optimistic).
• We’ll get to hear about yesterday’s Facebook $240 million investment, which sounds high but might not be for the company since it is a fraction of its billions.
• Windows Vista and Office 2007 sales will be key to watch, as well the legacy sales still going to XP.
• That dividend hike ‘not being enough’ may have caught notice.

Microsoft is trading up over 2% at $31.91 today on strong earnings hopes, which if this hold it would mark a high close over the last year.  It looks like it might even be a 5-year high.  Maybe it can reach that $36 target 24/7 Wall St. assigned after all, albeit a bit late.

Microsoft won’t likely discuss this, but with Apple taking more marketshare in computers and with Mac OS X Leopard launching tomorrow youhave to wonder if this is reaching a point that Microsoft has startedcaring.  The good news is that Microsoft still sells Office for Maccomputers.

Jon C. Ogg
October 25, 2007