1. The revenue and profit Forecasts
The Microsoft forecast for Q4 of the company is $ 23.05B revenue and $ 0.58 to EPS. Compared to last year, Analysts expect to fall in profitability 2c, a 5% increase in revenue. A drop below $ 0.60 EPS would be unfortunate for Microsoft, Because it would stop the growth of the last four consecutive quarters, after a tax disappointing year 2014, When EPS fallen About 7% in the year, with Q1 and Q3 regression of more than 10%.
2. Acquisitions: the jury is still out
Two major Developments since the last quarterly report on April 21 First, Microsoft bought on LinkedIn (NYSE: LNKD), the social network for digital professionals, for $ 26.2B. It is the largest acquisition of Microsoft, but the jury is still out on Whether it was a smart move by the technology giant. It remains to be seen Whether Microsoft will be reliable to leverage the buy to benefit your business underlying productivity, Including ITS Office suite and Windows products.
In February, LinkedIn shares fell by almost half, from $ 192 to $ 108 next forecast revenue of $ 3.6B LinkedIn for 2016, well below expectations of $ 3.9B Wall Street. While 300M LNKD Existing users are potential customers of Undeniable Importance for trade services of Microsoft, we would still has to do more business plan for esta acquisition and Microsoft Have an notion of how to Achieve the integration of LinkedIn will be the in order to justify the significant price tag.
Also Microsoft had a deterioration of $ 950 million as part of a restructuring of Its mobile segment. This deterioration is, in Addition to STI $ 7.6b cancellation a year ago, in connection With its purchase in September 2013 of Nokia (HE: NOKIA) for Nearly $ 10B, Which failed to bring business telephony Microsoft on par With the Apple (NASDAQ : AAPL) iOS or NASDAQ (the alphabet: GOOGL) Android.
3. Personal computing More
As a result of corporate restructuring ITS 2015 for all things unrelated to the Office suite or the owner of Cloud, MSFT created the MPC division, Which stands for “More Personal Computing.” This division covers everything from disparate hardware, phones and tablets: such as With software such as Windows 10, Xbox and Bing. It Represents 43% of revenues, but only 23% of operating income of the company.
According To Analysts at BMO Capital Markets, will be esta division responsible for most, if not all, of the Microsoft operating esta quarter growth. Unfortunately, Most of the growth Within esta division Seems To Have Come to cut operating expenses. The Conclusion is then a not so attractive: while the numbers for Fiscal Q4 of Microsoft Might be good, Have investors to lower expectations for the future Their Because the potential cost cutting moves are finite.
4. Cloud Computing as a rainmaker?
Cloud Computing, or “intelligent cloud” as designated by Microsoft, is supposed to be the growth engine of the company for the future. Microsoft Announced a $ 20 billion goal of annual revenues in 2018 in, It Might just happen. Azure, the Microsoft cloud platform, has seen revenues grow by ITS 120% year on year in Q3 ’16 tax.
, Although Microsoft is still playing catch up with the market leader Amazon (NASDAQ: AMZN), with Azure bringing to 600M Estimated quarterly Compared to the Importance of cloud computing is growing in overall web Amazon Services $ 2.5B, and Microsoft is poised to reap much of the benefits. That revenue numbers it is almost always used currently are number two in the industry behind Amazon, but ahead of Google and IBM (NYSE: IBM).
5. Strong Dollar
As always, a strong dollar is detrimental to Businesses That Provide significant revenue from abroad. The dollar has not lost a step in the last quarter, with Brexit and European bank turmoil Affecting the euro and adding risk to the market equation. So far, the backwash has not Been drastic, but it’s still something to keep in mind When Considering the overall numbers.
Microsoft is no longer an exciting new adventure. In fact, it is now a mature business and Should be EVALUATED as such. It would be a mistake to expect to revolutionize the world again.
While it is the suppression of traditional physical server product revenue, you are making a great effort to replace revenue through new resources and technology, as the cloud. That’s good Because Microsoft’s core business does not Appear to be significant nowhere.
Microsoft would be reasonable to expect to resume EPS and revenue growth after a period of adaptation to the changing business environment. After a bad run, stagnant, we believe it will break and That summarizes revenue and EPS growth of 5-7% percent per year. We anticipate the share price is That likely to follow.