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Will Microsoft Corporation (MSFT) Earnings Grow From Its Restructuring?

Microsoft Corporation (NASDAQ:MSFT) is scheduled to release its quarterly earnings report tomorrow, and as usual, investors are divided in their opinions about whether the tech giant will reach its full potential or fall short of its rivals. But with the company having just announced a major restructuring, shareholders hope that a shifting of focus toward processes over products will help boost future Microsoft Corporation (NASDAQ:MSFT) earnings.

Microsoft Corporation (NASDAQ:MSFT)

With the unfortunate timing of its addition to the Dow Jones Industrial Average (INDEXDJX:.DJI) in late 1999, Microsoft Corporation (NASDAQ:MSFT) shares have been playing catch-up for years since the tech bubble burst. But on a dividend and split-adjusted basis, Microsoft Corporation (NASDAQ:MSFT) stock has recently matched the level at which it entered the Dow Jones Industrial Average (INDEXDJX:.DJI). Let’s take an early look at what’s been happening with Microsoft over the past quarter and what we’re likely to see in its quarterly report.

Stats on Microsoft

Analyst EPS Estimate $0.75
Change From Year-Ago EPS 12%
Revenue Estimate $20.74 billion
Change From Year-Ago Revenue 14.8%
Earnings Beats in Past 4 Quarters 3

Source: Yahoo! Finance.

Can restructuring really help Microsoft earnings?
Analysts have lowered their views on Microsoft Corporation (NASDAQ:MSFT)’s earnings in the past few months, cutting their estimates for the June quarter by $0.03 per share and their full-year fiscal 2014 consensus by a nickel per share. But that hasn’t stopped the stock from soaring, with a gain of almost 27% since mid-April.

The bearish view for Microsoft Corporation (NASDAQ:MSFT) remains largely the same as it has for a long time. Microsoft hasn’t delivered on the full potential of its newest products: Windows 8 and the Surface line of tablets have performed rather poorly. Although last quarter’s earnings report included revenue and earnings-per-share growth of 18% each, just about all of the 23% gain in sales from the Windows division came from an upgrade offer that deferred revenue into that quarter. Meanwhile, falling PC demand continues to plague the industry, threatening to diminish the importance of its staple operating-system and office-software offerings.

Still, Microsoft’s efforts to grow in important areas like mobile and gaming have borne some fruit. The Windows Phone operating system reached the No. 3 spot in shipments, with Microsoft’s partnership with Nokia Corporation (ADR) (NYSE:NOK) providing much of the boost thanks to the hardware-maker’s Lumia line of Windows phones. Nokia Corporation (ADR) (NYSE:NOK) has also benefited, recently making share-price gains and approaching profitability expected by the end of 2013. Microsoft’s rates of app downloads and revenue have also more than doubled since the introduction of Windows Phone 8.

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