RealTime IT News

Analysts: Microsoft Profits Likely Down Again

Microsoft will announce third fiscal quarter for 2009 revenues and earnings after the close of trading on Thursday, and it goes without saying that many investors and other observers are watching those numbers anxiously.

Will Microsoft (NASDAQ: MSFT) demonstrate the same kind of weakness that some of its competitors and partners have, or will it join a handful of companies such as Intel (NASDAQ: INTC) by buoying the tech economy with signs of improvement?

The best indicator may be last quarter's numbers, which left the company still profitable but with declining revenues in key areas.

Last quarter, Microsoft posted a two percent increase in revenues over the same quarter last year but an eight percent decline in net income. Whether there will be much, if any, improvement remains to be seen. Certainly, corporate IT capital budgets are still suffering from the continuing impact of the recession.

In fact, the decline in revenue and earning last quarter prompted Microsoft CFO Chris Liddell to not provide any financial guidance for the rest of the fiscal year during the conference call with financial analysts last quarter – something Microsoft does not usually do Whether he will be more open this time around remains to be seen.

Layoffs or Not?

One outstanding question officials will face is whether Microsoft will announce further layoffs above and beyond the 5,000 personnel cuts the company announced last quarter. Microsoft officials are expected to at least give an update on that process.

Among the other uncertainties likely on investors' minds are Microsoft's continued flirtations with Yahoo for some sort of search and advertising deal, Oracle's plans to purchase Sun Microsystems and how that might affect Microsoft's SQL Server business, as well as the European Commission's (EC) pending antitrust actions against the company for bundling Internet Explorer with Windows. In fact, Microsoft will present its reply to the EC's allegations next week on the 28th.

Indeed, Sid Parakh, analyst at Seattle-based McAdams, Wright, Ragen was quoted as saying multiple sources had told the firm there may be more layoffs.

"Over the last week, we have heard from multiple sources that Microsoft may engage in additional restructuring activities in the near-term," Parakh was quoted to have said in a note to clients. The note was reported in a post on the TechFlash blog, a branch of the Seattle-based Puget Sound Business Journal. A call to Parakh was not returned by press time.

While it won't yield any cost savings, revenue, or earnings to the fiscal year's results, Windows 7 will also loom large in investors' minds, if only in a psychological sense.

"I think Windows 7 is really going to work for them [Microsoft]," Roger Kay, president of Endpoint Technologies, told InternetNews.com. "I think people are going to be relieved to see it," he added.

Although delivery of the new version is not expected until at least the very end of Microsoft's fiscal year or, more likely, in the first or second quarters of fiscal 2010, which starts July 1, assurances that Windows 7 is near may help stabilize the tech sector.

Some observers even entertain the hope that Microsoft on Thursday will actually announce an early ship date for Windows 7, although the company has only said it will be available by the end of January 2010.

(InternetNews.com reported last year that Microsoft was aiming for a June delivery to manufacturing.)

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