Microsoft Earnings, When Less Is More (MSFT)

Microsoft Corporation (NASDAQ: MSFT) has reported earnings and the management of expectations here is probably about as fair as any investor in today’s climate could hope for.  The software giant posted earnings of $0.48 per share and $15.06 billion in revenue.  First Call consensus estimates were for earnings of $0.47and $14.78 billion in revenue.  The company had given previous guidance of $0.47 to $0.48 EPS on $14.7 to $14.9 billion in revenue, while estimates at the time from First Call were $0.49 EPS on $15.06 billion in revenue.  What is interesting here is the guidance and the tone of the initial comments out of management before the conference call.

The company issued guidance for next quarter of $0.51 to $0.53 EPS and$17.3 to $17.8 billion in revenue.  First Call has estimates for nextquarter pegged at $0.55 EPS and $17.96 billion in revenue.

The company also issued guidance for Fiscal June-2009 of $2.00 to$2.10  EPS and $64.9 to $66.4 billion in revenues, and the estimatesfor Fiscal June-2009 are $2.11 EPS and $66.51. 

Kevin Turner, COO, discussed the environment of today perhaps in anear-perfect explanations: "Our customers are asking how they can savemoney and do more with less."

Chris Liddell, CFO, said, "we feel extremely good about our relativecompetitive position and our ability to continue outgrowing IT spend.We believe our exceptionally strong cash flow, product pipeline andfinancial strength will allow us to weather economic conditions well."

Shares closed up over 3.5% at $22.32 in regular trading and shares areup nearly $1.00 at $23.40 in after-hours trading.  The 52-week range is$20.65 to $37.50.

Jon C. Ogg
October 23, 2008