I do believe I saw Don King give a wink and a nod to Microsoft
following the software giant’s better-than-expected
quarterly earnings results released after the bell yesterday. Investors
wasted all last week nail-biting over the bellwether’s upcoming release;
but folks, when you get to be the preeminent poster-child for tech stocks,
earnings numbers begin to look a lot like a fixed title bout. And make no
mistake, the fix was definitely in on Softie’s latest release.
Behind the curtain, Microsoft’s army of crackerjack pocket protectors and
pencil pushing accountants were crunching the firm’s numbers to figure out
how best to affect a rebound in Softie’s slumping share price. With the
stock off more than 50% on the year, this latest quarter would have to be a
doozy. And as if on cue, Microsoft’s financial wizards managed to pull a
seemingly impressive rabbit out of the hat. Consensus forecasts called for
$0.41 per share, and the prizefighter weighed in a nickel ahead of
estimates. So how’d the company do it? With a little sleight of hand of course.
The magic words here are: “profits from investments” and “spending cuts.”
First, let’s get one thing straight. Microsoft makes money hand over
fist no ifs, ands, or buts. And through the company’s conservative
guidance to analysts that typically follows each blockbuster quarter,
Microsoft is virtually guaranteed to beat expectations
quarter-after-quarter. But when your share price is at its lowest levels in
two years, you don’t just exceed analysts’ estimates – you blow them out of
the water. The quickest way to over-inflate the bottom line numbers is
through profits from investments and trimming expenses.
Let’s face it, Windows 2000 isn’t flying off the shelves quite as fast as
analysts had anticipated, and Microsoft’s CFO called sales of Windows Me
“good.” In Microsoft speak, that means sales were just “eh.” But with the
sale of online check approval start-up Transpoint, which Microsoft held a
stake in, to Checkforce, plus gains
from the sale of Microsoft’s Sidewalk
Web property to Ticketmaster Online-CitySearch ,
Microsoft added a whirlwind $0.03 to its earnings results.
What’s more is that a chunk of the remaining $0.02 upside surprise stemmed
largely from belt tightening efforts related to expenses. That means the
eight hundred pound gorilla made a handful of lucrative investments and
cost-cutting measures, but in-house sales from Microsoft’s OS were
relatively flat, flat, flat. But, let’s keep things in perspective. The
market is sicklier than ever, and the appearance of knock-your-socks-off
earnings from a high-tech graybeard like Microsoft is just what the doctor
ordered. And as Don King would undoubtedly say, everybody loves a winner.
Any questions or comments, love letters or hate mail? As always, feel
free to forward them to kblack@internet.com.
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Microsoft’s Sleight Of Hand
