Thursday, April 28, 2011

Microsoft Corp. (NASDAQ: MSFT): Q3 Earnings Preview 2011

Microsoft Corporation (NASDAQ: MSFT), the world's largest software maker, is scheduled to release its fiscal third-quarter earnings after the closing bell on Thursday, April 28, 2011. Analysts, on average, expect the company to report earnings of 56 cents per share on revenue of $16.19 billion. In the year ago period, the company reported earnings of 45 cents per share on revenue of $14.50 billion.

Microsoft Corporation develops, manufactures, licenses, and supports a range of software products and services for various computing devices worldwide. The company is organized into five operating segments: Windows and Windows Live, Server and Tools, Online Services, Microsoft Business, and Entertainment and Devices. 

In the preceding fiscal second-quarter, the Redmond, Washington-based company's net income was $6.63 billion, or 77 cents a share, compared to $6.66 billion, or 74 cents a share, in the year-ago quarter. Revenue climbed 5% to $19.95 billion from $19 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 68 cents per share on revenue of $19.14 billion. 

The company is able to rely on the resilience of its flagship Windows and Office software to help it turn in consistently strong earnings reports

Microsoft’s mobile platform faces stiff competition from both Apple’s iPhone, and Google Inc.’s (NASDAQ: GOOG) increasingly popular Android mobile software. Early in February, Finland-based Nokia said it is forming a broad strategic partnership with Microsoft to use their complementary strengths and expertise to create a new global mobile ecosystem. Nokia will adopt Windows Phone as its principal smartphone strategy and Symbian will become a franchise platform. The agreement for the more than a billion-dollar payment is said to be part of a campaign by Microsoft to keep Nokia from choosing Google Inc.'s Android operating system. Microsoft will offer some money up front to help Nokia market and develop the phones. Nokia, in turn, will pay a fee to Microsoft for each copy of Windows used in its phones, in addition to the right to use some of Microsoft's patent portfolio. Nokia's royalty payments are expected to help Microsoft make a profit on the deal even after the payments to Nokia. The deal is expected to benefit both companies financially while helping stave off smartphone competition from Apple and Google.

Similarly, Microsoft has received some criticism for being slow to attack the tablet market as Apple’s iPad and a host of competing slate or tablet devices are poised to reshape the software industry.  Microsoft has reassured many that it’s serious about the tablet market, thanks to the company’s recent announcement that it will develop its software to be compatible with semiconductor technology developed by partners of ARM Holdings PLC (NASDAQ: ARMH), which predominates in the tablet market.

The company is trying hard to capture a bigger share of the online search advertising market. Microsoft unveiled its revamped Bing search engine in 2009, and has had Bing placed behind Yahoo’s search service, in a revenue-sharing arrangement designed to help Microsoft gain ground more quickly on Google. Microsoft and Yahoo held a combined 30% share of the U.S. search market in March, according to comScore Inc. data, compared with a more than 65% share enjoyed by Google.

Microsoft is also taking initial steps towards cloud computing to counter a threat from Google and others. The company recently launched beta version of its Office 365 applications, which include Web-hosted email and other tools available via subscription.

The company's stock currently trades at a forward P/E (fye Jun 30, 2012) of 9.61 and PEG ratio (5 yr expected) of 1. In terms of stock performance, Microsoft shares have lost 14 percent over the past year.

Full Disclosure: None.
Related Posts with Thumbnails

Wikinvest Wire