Not every Microsoft analyst is bearish about the company. Katherine Egbert at Jefferies & Co. just raised her estimates for Microsoft’s Q4 based on the strength of Kinect sales. She is modelling $19.1 billion in revenue, with EPS of $0.69, up from $18.5 billion and EPS of $0.66.
She says the Kinect, “is on pace to be the fastest-selling device of all time.” This is giving Microsoft “an important psychological win,” and “its success may help neutralize the current negative sentiment on the stock.”
We’re not so sure about that. If Microsoft wants an important psychological win it needs to announce Windows Phone 7 is blowing the doors off. Or it needs to lay out a coherent strategy for tablets. That would get people really excited.
But, we do think Kinect is a nice story for Microsoft and one of the biggest winners in tech for 2010.
Here’s the key points of her note:
Calls to 55 major retail outlets in the US indicate Kinect is largely sold out.
- Raise estimates due to Kinect sales strength. Microsoft has said it will sell through five million Kinect units this quarter, and our retail checks confirm widespread unavailability of the new technology. We have raised our December quarter revenue/EPS estimates to $19.1Bn/69c from $18.5Bn/66c. The $600mm increase is due to sales of Kinect sensors, Xbox 360 consoles, and Kinect software games. For FY11 (June) we now estimate $68.4Bn/$2.51 vs $67.3Bn/$2.48, and for FY12 we estimate $73.6Bn/$2.74 vs $71.4Bn/$2.70.
- Kinect appears to be the fastest-selling device ever. It is selling at 2.5x the rate of the iPad since debut: Kinect is on track to sell 100,000 units per day through Christmas (five million units over 50 days); the iPad sold 1mm units in the first 27 days it was available. However, Kinect sales are likely to slow post the holiday season. Still, the technology has applicability beyond gaming, and we see Kinect as an important psychological win for Microsoft as it seeks to regain relevance in consumer tech.
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