News

Analysts Predict Revenue Decline Ahead of Microsoft's Earnings Report

Analysts are forecasting a year-over-year revenue decline of 5.3 percent totaling $16.45 billion for Microsoft, Forbes reported Monday (citing Zacks Investment Research), while earnings are expected to drop 16.2 percent or 57 cents per share, down from 68 cents per share last year. Prior to lowering expectations, analysts were forecasting 60 cents a share. This comes before tomorrow's disclosure of Microsoft earnings for its fiscal quarter that ended Sept. 30.

Longtime Microsoft follower Rick Sherlund, an analyst at Nomura Securities, told CNBC Monday that he believes revenues could be off by 6 to 7 percent, though the company could report 1 percent increase based on deferred Windows 8 revenue.

The culprit is worse than expected PC sales, which plummeted 8.6 in the third quarter, according to IDC, a much sharper drop than the 3.8 percent decline the market research firm had predicted in August. Looming large over Microsoft and its partner ecosystem is next week's launch of Windows 8.

Yet despite short-term pessimism and some wondering if Windows 8 is doomed, Sherlund believes the coming quarter and perhaps the one after that will be rough ones for Microsoft, but ultimately Windows 8 will take off next year once Office 2013 ships. "There's a whole new re-platforming going on that will deliver a lot more functionality over the next six-to-12 months," Sherlund said. While Windows 8 and the new Modern UI will require a learning curve, Sherlund noted that the Apple iPad did, too.

"There is some disruption coming. People are going to have to spend a little time learning it," Sherlund said. "As you begin to see the TV advertising, it could be fairly seductive when you see the touch-based devices and the form factors are fairly creative. Ultimately, the story revolves around more functionality for these mobile form factors."

Sherlund expects Microsoft will see resistance from users who won't take an initial liking to the new Window 8 Modern UI (formerly known as Metro), much like the backlash over the Office Ribbon introduced in Office 2007. "People hated it. Now it's one of the most loved things in Office," he said "People hate change on a work utility like this."

While Sherlund has a point, it bears noting that some people still despise the Ribbon in Office and the new Windows experience is a much more jarring change than the Ribbon. Nevertheless, he warned the coming quarter will be challenging for Microsoft. "I think it's going to be a slow ramp given the volumes we are likely to see in Q4."

About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.

Featured

  • Microsoft and SAP Enhance Partnership with Teams Integration

    Microsoft and SAP this week described continuing partnership efforts on Microsoft Azure, while also planning a Microsoft Teams integration with SAP's enterprise resource planning product and other solutions.

  • Blue Squares Graphic

    Microsoft Previews Azure IoT Edge for Linux on Windows

    Microsoft announced a preview of Azure IoT Edge for Linux on Windows, which lets organizations tap Linux virtual machine processes that also work with Windows- and Azure-based processes and services.

  • How To Automate Tasks in Azure SQL Database

    Knowing how to automate tasks in the cloud will make you a more productive DBA. Here are the key concepts to understand about cloud scripting and a rundown of the best tools for automating code in Azure.

  • Microsoft Open License To End Next Year for Government and Education Groups

    Microsoft's "Open License program" will end on Jan. 1, 2022, and not just for commercial customers, but also for government, education and nonprofit organizations.

comments powered by Disqus