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Earnings Preview: Microsoft Corp.

Wed, 04/21/2010 - 8:30am
The Associated Press

Microsoft Corp., the world's largest software maker, is scheduled to report its fiscal third-quarter earnings after the stock market closes Thursday.

WHAT TO WATCH FOR: Strong revenue from the Microsoft divisions that make Windows and server software. Jeffries analyst Katherine Egbert expects Windows revenue of about $4.6 billion, about a third of Microsoft's expected total, and $3.6 billion in revenue from the server group.

Microsoft plans to update its Office software in May. Analysts have dialed back expectations for revenue in that division by $300 million or more to account for coupons distributed to PC buyers before Office 2010 launches. Microsoft can't report a portion of that Office revenue until the new software is ready.

WHY IT MATTERS: Microsoft's results will help industry watchers triangulate how much businesses are actually spending on technology.

Intel Corp., the first major technology company to report earnings, said on April 13 that orders were up for higher-end chips for corporate laptops, a sign that businesses had joined consumers in opening their wallets again after the recession. IBM Corp.'s revenue in the most recent quarter was stronger than it had been in the past year, another sign businesses were buying new software and other technology products.

And researchers at IDC and Gartner Inc. both said recently that worldwide PC shipments jumped more than 20 percent in the first quarter. Consumers were still buying inexpensive laptops and their smaller, cheaper netbook cousins, and researchers said they saw signs that companies were also starting to replace aging PCs.

WHAT'S EXPECTED: Analysts polled by Thomson Reuters expect Microsoft to earn 42 cents per share on $14.4 billion in revenue.

LAST YEAR'S QUARTER: Microsoft earned 33 cents per share. Revenue was $13.6 billion, a 6 percent decline from the prior year — a first in Microsoft's history as a public company.

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