VOL. 126 | NO. 140 | Wednesday, July 20, 2011
Focus on Windows Growth in Microsoft's Fiscal Q4
AP
REDMOND, Wash. (AP) — Microsoft Corp, the world's largest computer software maker, will try to shake the perception that it's turning into a technological dinosaur when it releases its latest quarterly results after the stock market closes Thursday.
WHAT TO WATCH FOR: Investors will likely be focusing on how Microsoft's Windows franchise has fared amid worries that the growing popularity of computer tablets such as the iPad are hurting sales of personal computers that run on the company's ubiquitous operating system. Revenue in the division that includes the Windows software has fallen from the previous year in each of the previous two quarters, intensifying the pressure on the company to show growth in the April-June period.
Worldwide PC shipments rose in the 2.3 percent to 2.6 percent range during the quarter, according two separate reports from the research firms IDC and Gartner. Those findings may telegraph a slight improvement for Microsoft in the same period, which marks the final quarter of the company's fiscal year. Apple Inc., the iPad's maker, also could provide another inkling of how PCs are withstanding the onslaught of computer tablets when it reports its quarterly results Tuesday afternoon.
The iPad's success prodded Microsoft to develop an operating system for tablets, but that isn't expected to hit the market until next year.
Microsoft's business model of licensing software that's installed on individual computers also is being threatened by the accelerating push to sell applications as services that are hosted over the Internet. The concept, dubbed "cloud computing," has been gaining traction as Microsoft rivals Google Inc. and Salesforce.com Inc. introduce more programs that can be used by any machine with a high-speed Internet connection. Microsoft recently began renting an Internet-delivered version of its widely used Office suite of software.
The quarterly results should also give Wall Street a better feel on whether Microsoft's huge investments are likely to bear fruit. Although Bing's search engine has attracted more traffic in the past few years, it remains far behind Google in the Internet's most lucrative market. Google's dominance is one of the main reasons Microsoft's online division has been consistently losing money.
As part of its effort to close the gap, Microsoft is providing the technology that runs Yahoo's search engine. But the partnership hasn't gone as smoothly as the companies hoped. Both Microsoft and Yahoo said in April that the partnership wasn't producing as much ad revenue as they anticipated, prompting them to delay expanding the alliance into other parts of the world. The shortfall also required Microsoft to pay Yahoo more money to compensate.
WHY IT MATTERS: Microsoft needs to prove its main software businesses still have plenty of room to grow to boost the company's stock price. Through Monday's trading, the shares had fallen by 5 percent so far this year. That contrasts with a 7 percent gain in the Dow Jones industrial average, which consists of 29 other companies besides Microsoft.
WHAT'S EXPECTED: Analysts surveyed by FactSet forecast earnings of 57 cents per share on revenue of $17.23 billion.
LAST YEAR'S QUARTER: Microsoft earned $4.5 billion, or 51 cents per share, on revenue of $16 billion at the same time last year.
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