THE MICROSOFT INVESTOR: Expect A Good Quarter But Not A Blowout

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Steve Ballmer

MSFT shares down as investors await news. Greece concerns are pushing the entire market down today, including MSFT shares.  MSFT is down slightly at $30.85.  Most expect a strong quarter from the company this evening, but not a blowout.  Investors will be looking for information on Windows 7 and Office 2010, which still drive the company.  Over the long haul, we think Microsoft is in a challenging spot, as the world moves away from PC-based computing toward cloud and mobile computing.  MSFT currently trades at 13x Enterprise Value / Trailing Twelve Months Free Cash Flow.

Wall Street Whisper Numbers Signal A Modest Beat (Business Insider)
Wall Street is looking for Microsoft to modestly beat consensus estimates so the MSFT shares will likely need a blowout to see a material move on the news.  The Street is largely expecting Microsoft to report a strong quarter across its Windows, Servers, and Business Division lines.  The company’s Entertainment division (Xbox) will likely be weak given industry sales data and the fact that the Xbox continues to lose share (expectations are low though).  Online services (only 4% of overall revenue) will likely look like Google and Yahoo’s results – indicative of a modest recovery in online advertising.  View a video preview from TheStreet.com here.

HP “Slate” Relies On Windows And Works More Like A Netbook: Modest Positive For Microsoft (Microsoft Watch)
A Mexican site called Conecti.ca got its hands on one of the upcoming HP Slates and gave mixed reviews.  On the one hand, the Slates work more like notebooks and use the Windows 7 operating system, which is good for Microsoft as it competes with Apple’s iPad.  On the other hand, Digitimes points out “Windows 7 on tablet PCs is still yet to reach a level that can satisfy consumers in terms of control.”  This isn’t good for Microsoft as it competes with the iPad OS (which has also received poor reviews for use beyond consuming content).  However, this edition isn’t even out yet and there will be plenty of time for improvements in next generation devices.

Microsoft And Facebook Join Forces To Crush Google Docs (Business Insider)
Facebook CEO Mark Zuckerberg said at an event yesterday that his company was working with Microsoft on a product called Docs.com.  Docs.com is an online version of Office.  Users can share the documents they are working on with their Facebook friends.  Jay Yarow at Business Insider points out “Microsoft is in a tricky spot here. This product is aimed at consumers, so if it takes off, Docs.com could cannibalise its own Office sales. (Office is a HUGE source of revenue and profits for Microsoft.) But, if Microsoft does not introduce its own online product, it will just watch Google cannibalise its sales.”  ZDNet got a few responses from Microsoft on Docs.com, which can be read here.

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