- Microsoft is scheduled to announce its Q1 2015 results after the market close on October 23.
- Recent events include expansion of partnership with Salesforce and the launch of Windows 10 preview.
- Analyst consensus estimates earnings of 49 cents on revenue of $22 billion. An earnings beat could reverse the recent downward trend in Microsoft stock while a beat could hasten the sell-off.
Microsoft (NASDAQ:MSFT) will announce earnings for Q1 of the company's FY 2015 (ending June 2015), after the market close on October 23. Over the past year, the tech giant has seen a number of new and exciting developments. Satya Nadella replaced Steve Ballmer as CEO in February. In recent months, the company has expanded its partnership with sometimes-rival Salesforce. And Microsoft recently announced the impending release of Windows 10.
Investors are curious to see how these developments have impacted Microsoft's results. Over the past 12 months, the company's stock has gained close to 24%. However, like nearly every company, it's facing a broader market pressure. Microsoft's stock has shed 7% in the last month. The upcoming earnings release could either reverse that downward trend or expedite the sell-off.
In May, Microsoft and Salesforce released a joint announcement that the two rivals had unexpectedly formed a partnership. The partnership is limited to certain functions, but it opened the door to greater collaboration.
The original announcement said that the two companies would partner on three specific projects: Salesforce integration with the BI tools in Excel, Salesforce integrations with Outlook, SharePoint, and other Office applications, and a Salesforce1 app for Windows 8.
That original announcement was followed by a second announcement in October that provided specific delivery dates for those projects. The integration of Salesforce1 into Windows 8 devices is already available on an invitation-only basis and will be widely available in the first half of 2015. Also, in the first half of next year, Salesforce will be integrated with Outlook, OneDrive, SharePoint, and Excel's BI functions.
What does this partnership mean for Microsoft? The two companies are still very much competitors, especially in the CRM space, where Microsoft recently slashed its prices to make its offering more attractive. While Salesforce and Microsoft share much overlap in their customer base, it will be interesting to see whether this partnership lifts both parties or whether it opens a door for one to siphon off customers from the other.
On October 1, Microsoft publicly released its preview version of Windows 10. The name is notable because it comes directly on the heels of Windows 8. Windows 9 was skipped, reportedly because this will be the final "new" version of Windows and the company wanted a name that conveyed the significance of the event.
Microsoft 10 is an attempt to unite all the devices in the Microsoft universe while staying true to the operating system's desktop roots. That's important because Windows is still king in the desktop world.
According to NetMarket Share, various versions of Windows account for nearly 92 percent of overall desktop operating system market share. The only other operating systems that register on the map are Mac OS X 10.9 with 4% and Linux with 2%.
Windows 8 had been an attempt to transition into the mobile space and away from desktop. It used touchscreen technology, integrated apps, and it hid the ever-popular "Start" menu. Windows 10 keeps those mobile-friendly elements, but also brings back the items that have made Windows so popular in the desktop space.
Microsoft Q1 2015 analyst estimates
Microsoft is currently trading at a PE of 16.5. It had been as high as 17 before the recent downturn in the market. While that may be on the high side when compared to other blue-chip companies, it's on the lower end of the tech spectrum. Google trades at a PE of 26.79. Facebook is trading at a multiple of 81.28. Salesforce doesn't have a PE because it hasn't had positive net income in more than a year.
Microsoft PE Ratio Chart
The other thing that Microsoft has going for it is that the company is one of the few tech companies that dividend investors can include in their portfolio. Microsoft has increased dividends by 25 percent at this time each of the past 10 years. Look for a similar increase this year.
Analysts are all over the board with their Microsoft stock analysis. The average Microsoft earnings expectation is $0.49 per share, which is substantially lower than last year's $0.62 per share. Some analysts peg the earnings as high as $0.59 per share and others as low as $0.40 per share. Analysts estimate $22 billion in revenue, implying a 19% YoY growth over Q1 2014.
Microsoft Revenue Chart
Microsoft seems to be fairly valued at this time. I expect earnings to slightly exceed expectations and come in at $0.51 per share. That should be enough to give the stock fresh momentum and hold up well against any further turmoil in the market.