It has been a long time since Microsoft held an aura of invincibility, and these figures are not about to reverse recent history.
On Tuesday 21 July the company is due to post its fourth-quarter figures. Year-on-year the adjusted earnings per share are set to drop from $0.58 to $0.571, while the sales figures are called at $22.084 billion down from the previous year’s $23.382 billion. Subsequently the company’s pre-tax profits are called at $6.02 billion down from 2014’s $6.577 billion.
Institutional opinion is still broadly positive for the firm with 22 buy recommendations, 14 holds and only seven sells. The average 12-month target for the company is $50.23 while the current share price of $44.80 is still offering a healthy 12% upside.
Microsoft is expected to launch its latest update to its Windows software, version 10, on Wednesday 29 July, and it is slightly better placed to capture a larger volume of clients needing to update their software. The new version is expected to correct the mistakes of the previous version by offering a standardised platform with universal apps.
An area that continues to cause management headaches is the migration of end-users away from hard top PC’s and onto smartphones and tablets. This is a trend that is unlikely to end any time soon and would partially explain the company’s purchase of Nokia. The widespread binning of the various staff and arms of the former mobile phone heavyweight is even more baffling, as it already had extensive tie-ups with the firm, and should have had a better understanding of where it was positioned. The current thinking revolves around creating a niche market for its products for either business users, cost-conscious customers or Windows lovers.
History would suggest that companies pinning their hopes to a brand name associated with once-great sales and faithful consumers are setting themselves up for future disappointment.
Once again April saw Microsoft threaten to break above $50, however this was a step too far and the shares have spent the majority of the rest of the following couple of months drifting lower. This US reporting season has seen expectations kept low, but even so it is far from clear how Microsoft will change this trend.