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MSFT Up And Down With Market
Market has recovered some of the losses in early trading, however remain volatile on Goldman Sachs earnings (or lack thereof) and continued European debt fears. Shares of MSFT are erratic as well ahead of earnings. Upcoming catalysts include first fiscal quarter earnings announcement on Thursday, October 20 at 5:30pm ET; Windows 8 and entrance into the tablet market; Windows Phone 7 / Mango rollout (see below) and adoption with hardware partner Nokia; strides against current market leaders in cloud computing; 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 (see below). The stock currently trades at 7.8x Enterprise Value / TTM Free Cash Flow.Earnings Preview: What To Expect (Forbes)
Expect more details from Wall Street in Thursday’s newsletter, but just as a preview, here’s what to anticipate:
- Consensus: Analysts are expecting Microsoft to report earnings of $0.68 / share, up 9.7% from a year ago on revenue of $17.25 billion, up 6.5%.
- Ratings: Two-thirds of analysts rate Microsoft as a Buy.
- Price Movement: Since last quarter, the stock price has fallen $0.10 ( to $27.27 from $27.37 on July 19).
- Trends: The company has seen net income rise in two straight quarters and revenue has increased for four consecutive quarters.
Ahead of Thursday, all eyes will be on Apple tonight as they report earnings after the close.
Growth Concerns Weight On Microsoft’s Quarter (Associated Press)
Microsoft will try to build on the positive news surrounding the next version of Windows when the company releases its latest quarterly results after the close on Thursday. The main problem for Microsoft is the iPad could be even farther ahead by the time Windows 8 is ready to hit the mass market (which is anyone’s guess). The shift to non-PC computing already has been reducing demand for the Windows franchise, Microsoft’s bread and butter. Microsoft needs to prove that it’s not turning into a technological dinosaur.
Microsoft Pays Partners In U.K. To Promote Windows Phone (Mobile Magazine)
Microsoft is donating a pile of cash of $44 million to Nokia and Samsung’s seasonal advertising campaigns in efforts to lock-up U.K. market share for Windows Phone. Nokia is set to get the lion’s share of that sum as Microsoft’s strategic partner, or about $31 million as part of a wider strategic agreement to work together on joint marketing. The money will be used to promote the launch of the first Nokia smartphone to run on Microsoft’s latest Windows 7.5 (Mango) operating system, which is set to launch later in the month.
How Microsoft Can Fix Its Online Division Losses (Business Insider)
Business Insider recently sat down with Frank Holland, VP of online advertising for Microsoft, and asked him how the company plans to increase its share in search and display, given that it’s been losing ground:
- Microsoft keeps losing money online because it’s “willing to invest for whatever it takes in both display and search. Until we get to critical mass in search we don’t believe the job is done.”
- Display is as important to Microsoft as search – and not just on the Web, but also Xbox, Skype and Nokia.
- We talk a little about consolidation. Should there really be three portals – AOL, Yahoo, and MSN? What distinguishes them?
To listen to the interview, click here.
Daily Trader: Microsoft Could Be A Good Option For 2012 (Seeking Alpha)
What does Microsoft have to offer an investor in order to want to invest for 2012?
- A new client base through Skype
- Expanding partnership alliances
If that’s convincing enough (although I don’t know why it would be), buy a November 27 put at $1.03 and selling a November 25 put at $0.36. That gives a debit of $0.67. If investors expect the stock to move back down to the 24 level before then, there’s a 2-point spread to work with to create a nice profit level.