Microsoft Suits Up For Earnings Duel (MSFT)

After the close of trading today, we have an earnings attention war with Microsoft Corporation (NASDAQ: MSFT), the software and IT giant, going head to head for earnings attention with Google.  While these companies both want to take away from each other, they are both still quite different in their products, models. and practices.

Over in Redmond, Washington, Microsoft (NASDAQ: MSFT) is on deck and this report will actually mark its Fical-2008 year-end.  First Call’s estimates for the quarter are $0.47 EPS on $15.65 Billion in revenues.  For next quarter the estimates are $0.49 EPS on $15.06 Billion in revenues.  Estimates for 2009 are actually higher than they were at last quarter’s report, and the consensus for Fiscal June 2009 is $2.16 EPS (almost 15% expected growth) and revenues are expected to be about $67.3 Billion in revenues (implied 10% to 11% growth).

This is going to be an interesting quarter because the company now only has Windows Vista on the market as of the end of June.  But its operating system sales also have Apple as a much stronger emerging competitor than in the last upgrade cycle.  The good news is that we’ve seen solid guidance out of PC makers in Dell and H-P and that implies strong Windows O/S sales.  With about $35 Billion in cash and equivalents at the end of last quarter and with the company regaining its footing from the called-off Yahoo! deal, the future direction of the company’s web-based strategies and efforts are still somewhat of an unknown by Wall Street (and maybe even inside the company itself).  Is the company going to go back after Yahoo! or will it do a deal with AOL?  Those are some of the many questions still unanswered.  Our Steve Ballmer exclusive interview may offer a glimpse of what lies ahead, but we’d admit that this could change faster than you can scroll down this page.

Analysts still have an average price target north of $37.50, which implies an upside to this stock of over 35% from today’s levels.  We’d also note that options expire tomorrow, but it looks like options traders are expecting a move of up to about $0.85 in either direction.  Shares are up almost 10% from very recent lows, but they are also down by close to 25% since the highs at the end of 2007.

Jon C. Ogg
July 17, 2008