Research archive for MSFT

On Tuesday night Microsoft released Q1 results which smashed the already high expectations. Revenues came in at a whopping $37.2bn, ahead of the expected $35.8bn, thanks to outperformance in all three of their main segments. Earnings per share also comfortably beat the street, coming in at $1.82 versus expectations of $1.54. Gross margins came in at 70.4% and operating cash flow reached $19.3bn. Mouthwatering stuff.

Microsoft released a strong set of quarterly numbers yesterday, beating on both revenue and profit expectations. The last three months have been the toughest for most businesses as they had to operate amid the economic downturn brought to us by the Covid-19 pandemic. Microsoft has benefitted enormously from us working from home and our need for home entertainment.

Microsoft was recently added to the Vestact list of recommended stocks in New York portfolios. There are already quite a lot of clients who own them, but now it will be suggested to those entering the market with fresh funds. We will also write about them in this newsletter more often, in the months and years ahead.

Microsoft announced new Teams features to help people adjust. Teams saw its usage surge over 40% last week as people were social distancing and working from home. Microsoft Teams turned three years old on the 19th of March, and its growth has been mind blowing as demand for the communications app has been unmatched since the start of this pandemic.

According to our friends at Statista, the Cloud Infrastructure business as a whole saw revenues of $27 billion in the fourth quarter of 2019, bringing the total revenues for the 2019 year to $96 billion. If you're curious like me, you have questions like who's the market leader, and how is the pie split up across the different participants?

On the 29th of January 2020, Microsoft released another strong set of numbers where their cloud business Azure set another record earnings number as it closes the gap against Amazon Web Services. Microsofts' "second quarter" revenues were up 14% year-on-year to $36.9 billion and net income was $11.6 billion thanks to Surface and Office 365.

The software giant Microsoft released its September quarter earnings which were better than analyst expectations but revenue guidance was slightly lower than expected. One of the biggest contributors to Microsoft's earnings was their cloud business Azure which the company said continued to see strength as world leading companies chose Azure to build their digital capabilities.

So LinkedIn is going to fall into the mitts of Microsoft. Not so much fall as shareholders of the largest self promotion business connection platform need to accept the offer of all cash at 196 Dollars a LinkedIn share. How big is this for Microsoft? At their (Microsoft) closing price of 50.14 Dollars last evening, the market capitalisation of the creator of the "Office" products was 393 billion Dollars. 26.2 billion Dollars in total. That is 6.67 percent of the Microsoft market capitalisation. Even with the 50 percent premium that they offered. I suspect that Microsoft are looking for a greater web integration into their office suite. If you think about it, and Paul often says it, the spreadsheet, email clients and editing tools such as Word have boosted productivity immeasurably. The world has changed for the better.

Microsoft announced their new CEO yesterday, an insider who has been there and lived through all the major operating systems and office releases over the years. Satya Nadella is his name and whilst he did a post graduate degree in the US, he is definitely an Indian from India. Born, schooled and even went to university there, before moving to the US to pursue his studies further. Nadella is only 46, but apart from age, the division that he ran and the direction of Microsoft from here are no doubt going to be much topic of discussion.

What the .....? Well, it was something that I suppose we were expecting all along, in the wee hours of the morning here it was announced that Microsoft would be buying most of Nokia's cell phone business. Stephen Elop, an Microsoft guy who went to run Nokia, is now seen as the replacement for Steve Ballmer, who announced his retirement days ago. All good I guess for Microsoft shareholders, the companies suggested that they had been working on this deal for a while now.

Earnings out of the US on balance were decent, there was a wide miss from Microsoft who reported in the aftermarket Thursday, the stock down 11.4 percent in normal trade Friday. I guess that even though the extent of the Surface RT (the tablet business) write off of 900 million Dollars, only seven cents a share, the fact is that they are not making as much progress as they want to. Or need to, for their shareholders. The fact is, the PC business is struggling, we are running at a quarterly PC sales run rate of 76 million. Two years ago, that peaked in Q3 2011 at 96 million a quarter. You can see exactly why Microsoft are struggling here, in a changing world of consumer behaviour. And amazingly as it may sound, Microsoft actually coined the phrase "Microsoft Tablet PC". It was made over a decade ago, but never quite took off.

Microsoft have two pieces of news this morning, or overnight should I say. Steve Sinofsky, the driver of Windows for Microsoft no longer works there. Parted ways. Fired. Left. All of the above. It says a mutual decision from this NY Times blog: The Leader of Windows Exits Microsoft. What does that tell you about the current Windows 8 release? That is the bad news.

Microsoft now trades on 11 times earnings, whilst the all time high (adjusted for the split last in Feb 2003) was nearly 59 Dollars at the end of December 1999. And the annual earnings per share back then was 1.42 USD, or net income of 7.785 billion Dollars on 19.7 billion Dollars worth of revenue. That was in 1999 when businesses were spending like gang busters, just two years prior to that in 1997, the business had made 3.454 billion Dollars off only 11.936 billion Dollars worth of annual sales. Just last evening the Microsoft revenue for the past quarter clocked 18.059 billion Dollars. The quarterly revenue was nearly more than the entire 1999. And more than double for the quarter past, than for the whole of 1996, where net revenues were 8.671 billion Dollars for the full year. And if you needed to know, last evening the company reported that they have 63 billion Dollars worth of cash on their balance sheet. Cash on hand for Microsoft in 1995 was less than 5 billion Dollars.

This raised more than just a few eyebrows, Microsoft announced last evening that they would be acquiring Yammer for 1.2 billion Dollars. Yammer has nothing to do with Usain Bolt and his ability to smoke the opposition over 100 metres, but rather a plug in piece of software that was supposed to improve productivity. That probably really does that. What is Yammer? Well, we used it once here and then promptly uninstalled it, for the only reason that Yammer is actually for bigger organisations with multiple users. It is basically a closed network of users who can interact with each other on chat, replacing memos, but has file sharing abilities as well. So, if I remember right, the software runs on your desktop, and integrates your calendar, tasks and all those clever things that Microsoft has achieved in their software over the years. But, 1.2 billion Dollars? I worked it out, it is a mere 14 and a bit days of Microsoft's EBITDA. Two weeks. That is it. And, if you forgot, Microsoft has a war chest of around 60 billion Dollars, in the bigger picture this is not a giant leap. So, expect the next patch in your new Windows operating system soon.

Do we even want to talk about the Microsoft Surface tablet? I guess we should and we must, the "Surface" was unveiled by CEO Steve Ballmer. The device weighs slightly more than the current iPad (the new iPad) but has a bigger screen, 10.6 inches compared to the iPad 9.7 inch screen. The pricing will be similar to that of other options out there, and by that I suspect that Ballmer means the Samsung Galaxy and the Apple iPad. What is quite cool is that there is a magnetic cover that doubles up as a fold down keyboard. And it can connect with printers, and it has a USB port. But, the expensive part will be that it runs a version of Microsoft 8 and office, so that licence part will have to be paid for by the user, which could mean that it might be more expensive that an iPad. As the WSJ points out though, if this is meant to replace the PC at home, then how do the manufacturers of PC's feel about this hardware muscling by Microsoft? Not too sure how they feel, but my thinking is that they do not feel altogether excited by this, HP, Dell and the like. I guess the good news for Intel is that their chips will be used in these products.