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MSFT Relatively Flat
Shares of MSFT are down a few pennies as the market gets a slight boost from a better than anticipated jobless report. Microsoft will announce second quarter earnings after the market close on Thursday, July 22. The company remains in a challenging spot as the world moves away from PC-based computing toward cloud and mobile computing. Catalyst include the company’s upcoming analyst day on Thursday, July 29 and upgrade cycles of Office 2010 and Windows 7. The stock currently trades at 12x 2010E P/E, inexpensive compared to historical trading multiples, but Microsoft’s rapid growth days are likely behind it.
Analyst Says To Buy Microsoft, It’s Cheaper Than IBM (Jefferies & Co., Inc.)
The sell-off in shares of Microsoft since the iPad was introduced in April has resulted in a valuation that is less than that of IBM. Katherine Egbert at Jefferies & Co believes iPad sales have to impact Microsoft EPS by up to 5 cents next year, however Windows tablets are on the way. She also raised her fiscal year 2010-2012 earnings estimates based on corporate PC upgrade cycle. Katherine reiterates her Buy rating and $36 price-target.
The Ax Is Swinging Throughout Microsoft (TechFlash)
Layoffs were indeed under way at Microsoft yesterday. The cuts are relatively small; in the hundreds globally. That’s nowhere near the 5,800 job cuts that Microsoft made across the company in 2009 and no where near the 30,000 – 40,000 the company should cut. Investors are concerned that this might be an negative indication for the second quarter while others see it as ongoing cost controls.
Xbox Live Is A Bright Spot For Microsoft Bringing In Over $1 Billion Annually (Forbes)
While everyone (including me) continues to kick the software giant while it’s down, there is one area where the company is kicking butt and taking names — online video gaming. Xbox Live has recently crossed the $1 billion revenue mark according to estimates. Xbox Live has about 12.5 million subscribers paying $50 a year, implying $625 million a year in subscription revenue. Virtual goods are at least bringing Xbox Live to about $1.25 billion a year in total revenue. Let’s see what Kinect can do; the buzz is it’s a stinker.
Daily Trader: Tech Giants Currently Have Cheap Valuations (The Motley Fool)
Six of the eight technology companies in the S&P 500 with a market capitalisation in excess of $100 billion trade at less than 13x estimated earnings for 2010. That’s historically low, potentially making those names good purchases longer-term. Microsoft is one of those names trading at 11x with a long-term growth rate of 11.5%.
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