After The Bell: Microsoft, AMD Earnings
Will sluggish PC sales affect Windows/Office revenue? AMD continues searching for a CEO.
Market Update
Technology giant Microsoft (MSFT) is slated to post quarterly earnings after the bell Thursday. Analysts, on average, expect the Redmond, Wash.-based company to clock earnings of $0.57 per share, rising from $0.51 per share the same time last year.
Analysts will likely key in on sales of the low-growth but high-margin Windows/Office franchises of Windows 7 and Office 2010 (both launched last year), which appeared to have gained solid customer traction. Sales of the Xbox, which is now the largest-largest gaming console in the United States, will also likely be eyed.
Investors might also seek an update on the Windows 8 operating system (due in 2012), which would be integrated across the PC and mobile formats and usher in Microsoft's first potentially real foray in the smartphone market, currently dominated by Apple's (AAPL) iPhone and phones based on Google's (GOOG) Android operating system.
CEO Steve Ballmer could also talk about Microsoft's initiatives with cloud-computing services, "a double-edged sword," according to Morningstar analyst Sunit Gogia, who says such initiatives could have the potential to cannibalize traditional Windows/Office revenues. He, however, adds in his Analyst Report, "But we expect the firm to successfully transition this business to a new cloud-based model."
With a 9% gain in the past month, the stock is not far from Morningstar's fair value estimate.
Also reporting after the bell is chipmaker Advanced Micro Devices (AMD). With bigger rival Intel (INTC) increasing its market share in processors for the PC and the high-end server segments since early this year, a substantial uptick in revenue and average selling prices would mean good news.
However, AMD's unsuccessful more than six-month hunt for a CEO following the departure of Dirk Meyer late last year means management might have some explaining to do. The market has punished the stock, falling by more than 20% in the past three months.
AMD shares are highly undervalued, as per Morningstar's fair value estimate. Morningstar analyst Andy Ng thinks AMD's latest line of Fusion processors and chips based on the Bulldozer architecture will in 2011 help the firm regain some of the market share it lost in the past few years.