Microsoft Taking Longer To Reconcile Quarterly Earnings? (MSFT)

Microsoft Corporation (NASDAQ: MSFT) is on deck to report earnings Thursday, October 28, 2010 after the close.  Microsoft used to be report at least in the middle of the pack of tech giants each quarter with earnings, but it is beginning to look like Microsoft is taking longer to report its quarterly earnings.  The  company has made no major acquisitions of late.  This brings up a legitimate question… Is Microsoft having a harder time reconciling its data?

We admit that the calendar could  be a part of the issue, but at the end of the day that is only one  among many potential issues that would cause a company to keep pushing back its earnings reports.  Many other companies have an equally complex structure in reporting earnings, yet they are able to get their earnings reports out rather fast each quarter.

October 1 fell on a Friday this year, which is the same as in January.  Having the first day of the month fall on a Friday in the case of months when earnings are due means that the end of the quarter came on Thursday and that translates to more weekend and less weekday time to compile earnings.  Even at public companies and even during quarterly reporting phases, employees are more available and more willing to put in the 16 hour days during the week to get reports out.

Here is the reporting schedule taken from past earnings press releases that shows which day of the month that the company reported the prior quarter’s earnings:

• Jul. 22, 2010
• Apr. 22, 2010
• Jan. 28, 2010
• Oct. 23, 2009
• Jul. 23, 2009
• Apr. 23, 2009
• Jan. 22, 2009
• Oct. 23, 2008
• Jul. 17, 2008
• Apr. 24, 2008
• Jan. 24, 2008
• Oct. 25, 2007
• Jul. 19, 2007

What is also interesting is that the quarters scheduled for Fiscal 2011 (tentative schedules most likely) are generally later than prior reports as well with the exception of its 2011 year-end release slated for July 21, 2011.   Here is the FY11 Earnings Release Schedule from the investor website for Microsoft:

• Q1-Thursday, Oct 28
• Q2-Thursday, Jan 27
• Q3-Thursday, April 28
• Q4-Thursday, July 21

Having later earnings does not  imply that anything is wrong.  In fact, the longer a company takes the higher the chance it will have more accurate data.  Accurate data are obviously a good thing.  In the efficient market theory, almost all information is supposed to be reflected in share prices at any given time.  The flip-side is that if there are any discrepancies or if there are any surprises then the company should have had that much longer to disclose it.

Maybe the late reporting cycle this month is not any giant flag since it happened once already this year.  The calendar ahead also has later earnings reports in the quarter.  Getting to the next to last day of the month for a quarterly earnings report seems late for a company the size and caliber of Microsoft.

Thomson Reuters has estimates for the largest software utility of $0.55 EPS and $15.83 billion in revenues.  Estimates for the quarter ahead are $0.68 EPS and $19.01 billion in revenues.

JON C. OGG