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Thursday, October 20, 2011

Analysts Haircut Estimates Ahead Of Earnings Tonight

Business Insider: The Microsoft Investor


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Thursday, October 20, 2011
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MSFT Down With Tech 
Markets are mixed as Greece's international creditors warn that a second rescue package not be enough while unemployment benefits dropped but missed expectations and the Philly Fed Index survey just smashed expectations. Shares of MSFT are down ahead of earnings. Upcoming catalysts include first fiscal quarter earnings announcement TODAY at 5:30pm ET; Windows 8 and entrance into the tablet market; Windows Phone 7 / Mango rollout 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. The stock currently trades at 7.8x Enterprise Value / TTM Free Cash Flow.

Join Business Insider LIVE Tonight For Microsoft Earnings (SAI)
For commentary, analysis and related banter, please join us for a live discussion of Microsoft's quarterly earnings tonight after the close. Click here for full coverage »

Wall Street Weighs In Ahead Of Tonight's Earnings (Various)
Consensus calls for revenue of $17.24 billion with EPS of $0.68. Expectations are managed:
  • Stifel Nicolaus: Tim Klasell lowered his estimates on weak consumer PC demand but expects upside from Office and Xbox. Guidance for the holiday quarter will likely be in line with current estimates. He reiterates his Buy rating and $32 price-target.
  • Evercore Partners: Kirk Materne modestly adjusted his estimates for increased market risk, namely: consumer and enterprise PC weakness, sluggish IT spending, inability to effectively compete with the tablet market and Windows 8 delays. He maintains his Equal-Weight rating and $30 price-target.
  • Nomura: Rick Sherlund cautions investors to expect slow growth for Microsoft’s fiscal year in in the absence of new product cycles and as the company has now past the anniversary of the Office 2010 launch, representing difficult year-over-year comparisons for the September and December quarters. The next significant catalyst is likely the release of the beta test of Windows 8, expected early next year. He maintains his Buy rating and $32 price-target.
  • Goldman Sachs: Heather Bellini lowered her Windows and MBD estimates on the back of the Hardware team's lowered PC shipment forecast. She is now below consensus on revenue and earnings. Although the largest impact was in Europe, the macro uncertainty affected spending decisions globally. Microsoft, however, likely benefited from deals that pushed from the June quarter to September, which could help to offset some softness. She maintains her Neutral rating and $27 price-target.
  • Morgan Stanley: Adam Holt believes that consensus estimates could be high for Microsoft on the Windows front but that the company might be able to offset that with strength in the enterprise. With Cloud, Xbox, Office 365 and Windows 8 as drivers, the company can maintain 5%+  revenue growth in a slowing IT environment. He remains a buyer.
Not too encouraging.

Steve Ballmer Avoids The Question Of Whether Microsoft Will Make Its Own Phone (ZDNet)
Should Microsoft make its own smartphone? John Battelle asked Steve Ballmer at the Web 2.0 Summit whether Microsoft would ever make its own phone. Ballmer said that he is really looking forward to the "bunch of new devices running Windows Phone" about to be announced at Nokia World, suggesting multiple devices running Windows Phone 7 will likely be launched. So Battelle asked again. But Ballmer didn’t explicitly defend the current Microsoft multiple-OEM model. Instead, he repeated that Microsoft would focus on "enabling hardware innovation." Read »

Ballmer Kicks Yahoo While It's Down (The Wall Street Journal)
Steve Ballmer isn’t shy. During an appearance at the Web 2.0 Summit he said that his company was probably fortunate that Yahoo turned down its $44.6 billion takeover bid a few years ago. It was just before the market crashed in 2008 and before Yahoo stumbled deeper into an ongoing turnaround effort.  “We would’ve closed about post-Lehman Brothers, so sometimes you’re lucky,” the Microsoft chief said. He didn't say whether Microsoft wants to revive a bid for Yahoo now that the company is officially on the selling block. Read »




Get complete Microsoft overage on Business Insider. Read »

Heather Leonard is a former tech research associate at Goldman Sachs and co-host of Business Insider's daily video show.
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