Thursday, January 28, 2010

Microsoft Corporation (NASDAQ: MSFT): Q2 Earnings Preview 2010

. Thursday, January 28, 2010

By Stock Wizard

Microsoft Corporation (NASDAQ: MSFT), the world's largest software maker, is scheduled to release its financial results for second quarter of fiscal year 2010 after the closing bell on Thursday, January 28, 2010. Analysts, on average, expect the company to report earnings of 59 cents a share on revenue of $17.84 billion. In the year ago period, the company posted earnings of 47 cents per share on revenue of $16.63 billion.

Microsoft Corporation develops, manufactures and supportes a range of software products and services for different types of computing devices. It has five business segments: Client, Server and Tools, Online Services Business, Microsoft Business Division, and Entertainment and Devices Division.

In October, the Redmond, Washington-based company reported that its fiscal first quarter net income fell 11 percent to $3.574 billion or $0.40 per share, from $4.373 billion or $0.48 per share, in the year-ago quarter. Revenues fell $12.92 billion from $15.06 billion. Analysts, on average, expected the company to report earnings of $0.32 per share on revenue of $12.32 billion. In November, Microsoft cut its full year 2010 operating expense guidance to $26.2 billion to $26.5 billion, from the prior range of $26.6 billion to $26.9 billion.

Microsoft Corp. officially released the latest version of its operating system Windows 7 on October 21, aiming to win back customers disappointed by Vista and strengthen its hold on the PC market. In November, the software maker said its sales of Windows 7 hit record levels. The company is poised to benefit from a rebound in PC market. Worldwide personal computer shipments in the fourth quarter of 2009 increased 22.1% year-on-year to 90 million units, according to preliminary results by Gartner Inc. The technology research firm said that it was the strongest year-over-year growth rate that the worldwide PC market has experienced in the last seven years.

The company is trying hard to capture a bigger share of the online advertising market. In July, Microsoft announced a search collabaration with online search engine Yahoo Inc. Last month, Microsoft Corp. said that it has finalized and executed the online search and advertising deal with software giant Yahoo! Inc. The two companies expect to close the transaction in early 2010. Since it launched Bing in June, Microsoft has steadily if slowly been gaining ground. According to a report by comScore the company's share of searches in the U.S. reached 10.7 percent last month, up 0.4 percentage points from November.

Among other events during the final three months of last year, Microsoft made two acquisitions. In December, the software firm acquired systems management vendor Opalis Software for about $60 million. It also agreed to buy Sentillion Inc., a privately held company in Andover that specializes in software for the health care industry.

Last month, the software maker declared a quarterly dividend of $0.13 per share. The dividend is payable March 11, 2010 to shareholders of record on February 18, 2010.
The company's stock currently trades at a forward P/E (fye 30-Jun-11) of 14.02 and PEG ratio (5 yr expected) of 1.45. In terms of stock performance, Microsoft shares have gained 67 percent over the past year.

Full Disclosure: None.

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