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Tech Check
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Microsoft Earnings |
We've heard from Intel, Google, Apple, IBM, Yahoo, eBay and each time analysts and investors steeled themselves against performance versus expectations.
Today is no different with Microsoft as the world's largest software maker prepares to release its first quarter financials.
For the past several weeks, as Wall Street suffers through wrenching gyrations that have taken some of its top stocks along for the nauseating ride, expectations around Microsoft continue to come down. You'll remember in July that Microsoft offered surprisingly rosy projections through the rest of 2008. The company was looking for $14.7 billion to $14.9 billion in revenue for its first fiscal quarter and 47 or 48 cents a share. Wow, what a difference a few months can make.
Consensus tonight is 47 cents on $14.8 billion for the first fiscal quarter.
Brendan Barnicle at Pacific Crest Securities would be surprised if they exceeded even the lowest end of those expectations now. Back then, Microsoft expected full year revenue of $67.3 billion to $68.1 billion. But expectations have plunged since with the Street now looking for a range of $66.3 billion to $66.5 billion instead. Full year earnings per share guidance from Microsoft had been $2.12 to $2.18. Street consensus now is at $2.11, Barnicle is at $2.07, and just yesterday, UBS dropped to $2.04.
Still, in order to tell this company's financial story properly, you have to dig deeper to see how each individual business unit performs. And each unit is expected to be flat or down sequentially from its fourth fiscal quarter. The company's client software is expected to be flat sequentially at around $4.38 billion; its server and tools business should decline to $3.45 billion, and will be watched very closely since it's a good proxy as to how broader business is faring; its online business, a sore underperformer, should decline to $718 million; its business division should decline to $4.73 billion; and its entertainment division could see a decline to $1.45 billion. Flat or declining business across the board for this Microsoft.
Guidance will also be key for its second fiscal quarter. The Street's at $17.97 billion and 55 cents a share, though Pacific Crest expects something closer to $17.78 billion and 52 cents a share. The firm is concerned about PC unit growth, anticipating something closer to 5 percent when Microsoft had initially guided to a range of ten to 12 percent.
The one bright point on that front comes from an unlikely source. With Apple Inc.'s recent laptop announcements and prices cut less than analysts were expecting, Microsoft could see a new lease on life as consumers pay more attention to cost than they have before. "(Microsoft) could maintain share by default, just because of (Apple's) prices," Barnicle tells me.
Expectations are muted, and even though analysts are expecting a weakened forecast, it'll come down to just how weak Microsoft's outlook ends up being. Missing these far lower expectations could be a serious problem for this company and its investors. Trouble is, meeting or beating -- because expectations have come down so far -- may not offer any boost either.
Questions? Comments?
Data is a real-time snapshot *Data is delayed at least 15 minutes