The Microsoft Investor is a daily report from SAI. Sign up here to receive it by email.
MSFT Up In Mixed Market
Stocks are mixed on news of rising initial jobless claims and reports of a slower GDP growth. Shares of Microsoft are up against the tech tape, which is trading in the negative. Upcoming catalysts include fiscal third quarter earnings to be announced TONIGHT at 5:30pm Eastern Time; entrance in the tablet market at some point; Windows Phone 7 adoption with hardware partner Nokia; strides against current market leaders in cloud computing; retooling the Bing / Yahoo! partnership (or just buying them outright); and continued momentum of Kinect and the next gen console. The stock currently trades at 8x Enterprise Value / TTM Free Cash Flow, inexpensive compared to historical trading multiples.Join Silicon Alley Insider For LIVE Coverage Of Microsoft Earnings (Business Insider)
Ongoing conference call commentary, financial analysis and more.
Wall Street Gets In Last Minute Comments Before Earnings (Various)
What is expected tonight:
- Adam Holt at Morgan Stanley believes Windows targets are likely high but this is well-known and solid non-PC enterprise demand and below-seasonal estimates should help the company meet consensus ($16.2B / $0.56). The PC market has to bottom for Microsoft to get more credit for strength in non-PC enterprise segments and the emerging secular stories (Azure). He believes management is targeting revenue growth above operating expense growth for FY12 (year-end June) and reiterates his Overweight rating. At 9x FY12 EPS, the stock is too cheap.
- Kash Rangan at Bank of America Merrill Lynch is optimistic on the stock as we enter the seasonally strong deferred revenue quarter. He reiterates his Buy rating and price-target of $38. He likes Microsoft as an unloved name with a +2.5% dividend yield, trading at only 10x CY11E price-to-earnings.
- Kevin Buttigieg at Collins Stewart believes the third fiscal quarter should be solid, though guidance may confuse. Investor expectations are likely below the stated consensus which could provide upside. Interest will be on share buyback during the quarter.
All eyes on Mr. Softie tonight after the close.
Nearly $8 Out Of $10 Spent On Operating Systems Goes To Microsoft (BetaNews)
According to Gartner, worldwide operating system revenue grew 7.8% to $30.4 billion in 2010, with Microsoft Windows continuing to lead the market by a wide margin. Linux server and Mac OS were the fastest-growing sub-segments in the server and client OS segments, respectively, while Microsoft maintained its leading position in the overall OS market, with 78.6% market share, up 8% year-over-year.
Microsoft’s Anti-Trust Days Are Over… (Reuters)
Thirteen years after the Justice Department filed an antitrust lawsuit against Microsoft, accusing the software giant of using its market power to pummel potential rivals, the case will soon be history. Attorneys told the judge that they would not raise any objections to next month’s expiration of Microsoft’s decade-old antitrust settlement with the U.S government. The Final Judgments are set to expire on May 12.
…Or Are They? Barnes & Noble Says Nokia Partnership Violates Anti-Trust Law (Electronista)
Microsoft is using its patent portfolio to squeeze royalties from manufacturers who install Android on their mobile devices, according to a new legal filing from Barnes & Noble. The bookseller has fired back against a patent-infringement lawsuit brought by Microsoft, saying the software giant is using the legal system to try to eliminate competition for its Windows Phone 7 operating system. Read more on how Microsoft charges more for patents to use Android than it does to use Windows Phone 7.