The crappy economy may cause Microsoft to blow the quarter, UBS’s Heather Bellini says.
Bloomberg: Microsoft Corp. may have to warn shareholders that profit and sales will fall short this quarter for the first time since 2000, according to Heather Bellini, an analyst at UBS AG.
Bellini, the top-ranked software analyst by Institutional Investor magazine, said every one of Microsoft’s five divisions may miss the company’s and analysts’ sales forecasts. The world’s biggest software maker won’t be able to cut enough costs to meet profit goals, New York-based Bellini said in an interview.
Microsoft said in October that it was preparing for a recession ranging from “mild” to “deeper” and forecast profit of as low as 51 cents a share and sales of as low as $17.3 billion. With consumers and corporations freezing spending, Bellini now expects the company to earn 48 cents a share on sales of $16.7 billion.
As a reminder, Microsoft’s five divisions are:
- Client (Windows).
- Server and Tools, runs Windows Server, database SQL Server, and consulting services. Making a push into cloud computing with Azure. Hurt by anemic tech spending.
- Business, develops Microsoft Office, competing with free upstarts like Google (GOOG) Apps.
- Online Services, recently hired Qi Lu to turn things around.
- Entertainment and Devices, doing OK with the Xbox 360 (but not as well as the Wii), still trying to sell Zunes for some reason.
But despite the economic climate, Bellini still thinks Microsoft is a better bet than most software firms — the company generates about a third of its sales from recurring contracts.