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MSFT Sliding With Markets
The market was mixed in early trading as both Bank of America and Morgan Stanley beat expectations, but a miss in jobless claims and concerns over Europe. Shares of MSFT are currently sliding with the rest of tech. Upcoming events include calendar first quarter earnings to be announced TONIGHT at 5:30pm ET. Catalysts for the stock include Windows 8, Windows Server 8, Office 15 and Windows Phone 8; expansion in the smartphone market with primary hardware partner Nokia; strides in cloud computing; profitability in the online business, including integration of Skype; and continued evolution of Kinect and next generation Xbox. The stock currently trades at 8.4x Enterprise Value / TTM Free Cash Flow.
Join SAI For LIVE Coverage Of Microsoft Earnings (Silicon Alley Insider)
Microsoft reports first quarter earnings after the market close. Join us TONIGHT for LIVE coverage of the release and conference call at 5:30pm ET.
Wall Street Previews The Microsoft Quarter (Various)
Consensus is $17.1 billion (4.4% y/y growth) in revenue and EPS of $0.58 (5.7% y/y decline):
- Wells Fargo: Jason Maynard believes that the potential recovery in the PC market could generate some slight upside. Another mild positive is the success of the Lumia device, as reported by Nokia. Xbox software, hardware, and accessory sales were significantly lower than last year which could negatively affect the Entertainment and Device division. He reiterates his Market Perform rating and valuation range of $28-30 per share.
- Citi: Walter Pritchard says that market estimates for PCs were slightly better than modelled which could support numbers by ~$300 million (or 2 cents), but the stock could still be weak on Windows 8 data points. He is still expecting Enterprise growth, with some deceleration likely. Investors should listen for additional Windows 8 details, RPS trends, the macro outlook and commentary on mobile. He reiterates his Buy rating and $35 price-target.
- Morgan Stanley: Adam Holt says this quarter is largely transitional ahead of several catalysts in the second half of the year which is keeping his outlook positive. With PC estimates low, total consensus below seasonal trends, and demand solid for the non-PC enterprise businesses, quarterly estimates appear reasonable. He reiterates his Overweight rating and $37 price-target.
- Bank of America Merrill Lynch: Kash Rangan believes there is upside to the Client business from a normalizing PC cycle. Going forward, how soon and how big Windows 8 tablets can contribute to Client in the next fiscal year (Sept) is going to be a critical stock driver. At this point there is no definitive investor expectation. He reiterates his Buy rating and $34 price-target.
Sounds like a non-event.
Nokia Is Making Lumia 900s As Fast As They Can… (All Things Digital)
The recent Lumia 900 stock-outs AT&T has been experiencing are a pretty good indicator of how the device is faring at market. And it’s sold out, not because Nokia is scrambling to update and re-certify returned handsets. “The inventory situation is primarily a function of demand because we are seeing that most customers are opting to keep their units and simply update via Zune,” according to a Nokia spokeswoman. That’s a good sign and further evidence that sales are exceeding expectations, as Paul Roth, AT&T’s president of retail sales and service, recently claimed.
…But If You Are Waiting To Buy One, It Might Be Obsolete In A Few Months (Business Insider)
There is some confusion regarding the ability to update the Windows Phone operating system. It is rumoured that current Mango phones, including Nokia’s flagship Lumia 900, will miss out on Windows Phone 8 making that phone outdated by the end of the year. Steve Kovach at Business Insider has asked the question several different ways with Microsoft refusing to answer.
Internet Advertising Revenue Hits All Time High, Mobile Fastest Growing Sector (IAB)
According to The Interactive Advertising Bureau, Internet ad revenue revenue grew 22% in 2011, to an all-time high of $31 billion. The fourth quarter were also the all-time best three months at $9 billion, an increase of 20% from 2010. Search remains the biggest sector, with $14.8 billion in revenue, up from $11.7 billion in 2010. Not surprisingly, however, in terms of growth rates, mobile is the fastest-growing sector, more than doubling from $0.6 billion in 2010 to $1.6 billion in 2011. Display advertising grew 35% to $11.1 billion overall, with video accounting for $1.8 billion.
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