The Number One Thing Investors Are Going To Look At In Tonight's Microsoft Earnings

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Photo: Flickr/Kevin Krejci

Microsoft reports earnings for the first quarter of 2012 today, and analysts are expecting mixed results, with sales up about 5% from last year to $17.18 billion and EPS down three pennies to $0.58.Check back this afternoon around 4 pm ET for the results, and again at 5:30 ET for live coverage of the earnings call.

The stock has been on a nice run for the last few months, rising almost 30% since November 2011. Analysts were pleased with the company’s diversity last quarter — other businesses grew enough to make up for a slowdown in Windows PC sales.

Can that trend continue this quarter? That’s the main thing investors will be looking for.

They’re also excited about new versions of Windows and Office, Microsoft’s two biggest products, coming out during the company’s next fiscal year (which runs from July 1 through June 30).

Some of the recent run may be due to expected rebalancing as well. Morgan Stanley analyst Adam Holt suggested in February Bill Gates is selling enough shares to change the number of shares outstanding, which would force the S&P 500 to add more Microsoft. That in turn would force index funds to buy Microsoft shares.

We’ll be listening if Microsoft says anything concrete about Windows Phone, given Nokia’s awful performance (we doubt it), and whether the company finally explains how much money it’s now earning from “cloud”-based solutions like Office 365 and Azure, which are supposedly the company’s future.

And like usual, we’ll be monitoring how much money the Online group (which is mostly Bing) loses.

Here’s a rundown of expectations for the quarter, which is Microsoft’s Q3 of its 2012 fiscal year. EPS and revenue are consensus expectations; the other numbers come from analyst Brent Thill at UBS, who’s covered the company for many years:

  • EPS: $0.58
  • Revenue: $17.18B
  • Operating income: $6.0B
  • Windows: $4.31B revenue, -3% from last year (that’s a bit worse than recent quarters)
  • Business Division (mostly Office): $5.56B revenue, +6%
  • Server & Tools (infrastructure software): $4.52B revenue, +10%
  • Entertainment & Devices (mostly Xbox): $2.11B revenue, +9%
  • Online (mostly Bing): $739m revenue, +14%.

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