Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Microsoft Corporation (MSFT): Are Its Earnings a ‘Prelude to a Miss’?

Microsoft Corporation (NASDAQ:MSFT) is scheduled to release earnings results on Thursday, and the apparent sentiment among analysts has been negative. Since the beginning of the quarter, the consensus estimate has fallen by $0.10, with full-year numbers dropping by $0.12. This is not surprising given all of the ink spilled in the blogosphere bashing Windows 8, questioning the Surface tablets, and lamenting the death of the PC. Even in the face of this barrage, the stock has held up pretty well, rising with the overall market by roughly 8%.

MSFT Chart

MSFT data by YCharts

Ahead of the company’s official release, the trick is figuring out not only what to expect, but also what numbers are most critical to when the company reports. Placing all of these figures into the proper context, not only historically, but when looking ahead, is what can give you an edge. Ultimately, while the bottom line figure may be far from spectacular, I am expecting some granularity that will hold the promise of a positive trajectory.

Microsoft Corporation (MSFT)

The PC market
The big black eye that is inescapable for any company associated with the PC business is the precipitous fall in sales that have been seen over the most recent quarter. IDC had expected a 7.7% contraction in PC sales but reported a 14% decline to 76.3 million units. While Gartner’s reported decline was less severe — a fall of 11% — the overarching message is that fewer PCs are moving.

Another confirmation of this trend came earlier this week, when Intel Corporation (NASDAQ:INTC) released its own earnings. While the company’s numbers were in line with expectations, they showed a 6% decline from PC sales. Investors should be prepared to see a similar decline in revenues from this dip on Thursday.

A possible offset to lower PC sales is the that Microsoft Corporation (NASDAQ:MSFT) has had more time to transition customers to Office 365. While the product carries a lower initial cash outlay — meaning that sales from Office could see a short-term dip — the recurring income it generates is a positive over time. Particularly as Microsoft Corporation (NASDAQ:MSFT) becomes an increasingly important player in cloud computing, the success of the company’s cloud-based productivity suite is critical, especially as the company scrambles to insulate itself from a shift to Google Inc (NASDAQ:GOOG) Apps by large numbers of people.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.