Microsoft Maintains Strong Business Spending Climate (MSFT)

Microsoft (NASDAQ: MSFT) posted earnings of $0.50 EPS on revenues of $16.37 Billion. First Call had analyst estimates at $0.46 EPS on $15.95 Billion.  Its previous guidance offered had been $0.44 to $0.46 EPS on $15.6 to $16.1 Billion in revenues.  The software and tech giant is also offering guidance:

• Next quarter $0.43 to $0.45 EPS on revenues of $14.3 to $14.6 Billion, which compares to  estimates for next quarter of $0.44 EPS on $14.43 Billion in revenues.
• For fiscal June-2008 it offered guidance of $1.85 to $1.88 EPS on revenues of $59.9 to $60.5 Billion; estimates were $1.81 EPS on $59.35 Billion in revenues.  Its prior guidance had been $1.78 to $1.81 EPS on revenues of $58.8 to $59.7 Billion.

Jim Cramer had recently named this one his favorite overlooked or oversold tech stocks.  Also just last week Goldman Sachs raised this one again to its CONVICTION BUY LIST, and they seem to have the Midas Touch here on this one. 

"Master Chief" noted that the company’s Client business grew over 20% and Windows Vista has passed 100 million licenses.  This quote from Kevin Turner, chief operating officer at Microsoft, is perhaps the key issue that will give tech investors some relief that the business spending is remaining at least somewhat strong rather than sliding off a cliff:
"We continue to see healthy demand from both businesses and consumers in the United States and our growth in emerging markets is especially strong. Looking across Brazil, Russia, India and China, our field revenue reached a combined growth rate over 65% this quarter. As we look ahead, our Windows Server 2008 launch, with our virtualization solution, will further our quest to bring exceptional value to our customers."

This one traded up 4% today to $33.25 in regular trading on well over 100,000,000 shares.  Shares are up another 4% to $34.60 in after-hours trading.  It’s just hard not to like this one on the surface. 

Jon C. Ogg
January 24, 2008