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MSFT Up Modestly Ahead Of Earnings
Stocks are strong out of the gate in response to the Philadelphia Fed Survey for July, which came in at 3.20, better than the 0.00 reading anticipated. Shares of MSFT are up as investors await quarterly numbers. Upcoming catalysts include second calendar quarter results to be released tonight at 5:30pm E.T.; the company’s Analyst Day at its new developer conference (BUILD) on September 14; Windows Phone 7 / Mango adoption with hardware partner Nokia; strides against current market leaders in cloud computing; entrance in the tablet market at some point; making money in the online business, including integration of Skype and improving the search / display business; and continued evolution of Kinect and next generation Xbox console. The stock currently trades at 8.7x Enterprise Value / TTM Free Cash Flow, inexpensive compared to historical trading multiples.Join Business Insider LIVE For Microsoft Second Calendar Quarter Earnings (SAI)
Tonight after the close, please join SAI for live commentary and analysis on Microsoft’s quarterly financial results and accompanying conference call.
Wall Street Previews The Quarter (Various)
What you need to know:
- Enterprise Strength Should Power Results: Walter Pritchard at Citi is expecting revenue and EPS in-line with consensus, slightly ahead of his estimates. He took a more conservative approach but expects that enterprise strength could offset any lingering PC weakness. Pritchard expect revenues in the $17.2B range which would drive EPS of $0.58. Things to listen for on the call: 1) insights into fiscal 2012 outlook, especially gross margin ; 2) Windows client dynamics; 3) enterprise spending trends; and 4) updates on emerging product lines.
- Waiting On September: Heather Bellini at Goldman Sachs says that her checks point to continued enterprise migration to Windows 7 and Office 2010, and given preliminary PC shipment data, she sees the company coming in line or slightly ahead of consensus estimates. She thinks the focus for the company will centre on two events in September: 1) BUILD, which will highlight Windows 8 applications and hardware, and 2) the Board of Director’s meeting where the company may announce an increase to its quarterly dividend of up to 13%.
- Hurdle Before Second Half Catalysts: Adam Holt at Morgan Stanley believes that solid non-PC enterprise demand and below-seasonal estimates should help the company hit his numbers of $16.9B in revenue and EPS of $0.53. He believes the stock already discounts weak PC shipments and a bottoming of the PC market means the company should start to get more credit for strength in non-PC enterprise segments and the emerging secular stories like Azure and the cloud. Given a variety of fall catalysts (potential dividend increase, Windows 8 timing, Nokia phones), he likes the risk reward at 10x.
Mango To Get Developers In August (ZDNet)
Microsoft is allowing developers to write applications targeting the Windows Phone Mango operating system and submit them for approval starting August 22. The company released a bunch of new features, including the rollout of the new App Hub developer portal and more than doubled the number of countries where handset owners can purchase apps.
Microsoft’s Future Rests In Mobile (The Wall Street Journal)
Given the stellar performance of Apple and the explosive growth of the iPad, it is pretty clear to everyone that the era of the PC dominance is over. Where does this leave Microsoft? Not in a good place. Figures on Microsoft’s share of web usage show that it fell below 90% for the first time and the chart is pointing south. Users are not switching to other desktop OS, they are switching to mobile devices. With Windows 8, Microsoft is unifying its user experience across an entire range of devices. But stakes are high and there’s not much room for error at this point.