In a new research note this morning, Goldman Sachs has reacted to the negative news on the recall and warranty charges on Microsoft’s (MSFT-NASDAQ) Xbox 360. This is after the company announced it would have a $1.05 to $1.15 Billion charge and if you do the math on the costs this could come out to half of the units that have already been sold. Supposedly this is not a design issue and is not affecting the currently built machines. Goldman Sachs has lowered FY2007 EPS to $1.41 from $1.49 and lowered FY2008 EPS from $1.70 to $1.69,although it has maintained the 2009 estimates. Microsoft was maintained as Buy at Goldman.
In a separate note, D.A. Davidson maintained a neutral rating on Microsoft, and trimmed FY2007 EPS to $1.49 from $1.50.
Based on the differences of the timings, it looks like the differences from firm to firm are going to be in the timing of the charges.
Jon C. Ogg
July 6, 2007
Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.
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