Microsoft's Q1: New reporting structure, same old problems

Microsoft's Q1: New reporting structure, same old problems

Summary: Analysts seem confident that Microsoft will hit its sales targets, but aren't so sure about earnings due to increased capital expenses.


Microsoft's fiscal first quarter results should be solid amid a strong enterprise business and Windows 8.1's rollout to the channel with new devices, but those financials will give analysts about 5 minutes of relief as larger issues loom.

The software giant on Thursday will unveil its latest quarter with a new reporting structure that is designed to give more transparency on profit and revenue for the enterprise and consumer businesses.



Wall Street is expecting earnings of 54 cents a share on revenue of $17.89 billion in the first quarter. Analysts seem confident that Microsoft will hit its sales targets, but aren't so sure about earnings due to increased capital expenses. Among the wild cards for Microsoft beyond the first quarter:

  • The CEO search;
  • Integration challenges with Nokia;
  • XBox One's reception;
  • The lower profit margins as Microsoft focuses on devices;
  • Can PC sales get off the mat?

Of those issues, the CEO search is the biggest issue, said Morgan Stanley analyst Keith Weiss. Weiss said in a research note:

Finding the "ideal" CEO candidate for Microsoft may prove a challenging task. In our view, the board needs to balance the requirements of: 1) a keen technology vision to sustain cloud momentum and gain share in devices; 2) proven operational skills to effectively run a >130K employee org.; and 3) strong communication skills to convince skeptical stakeholders that Microsoft is on the right strategic path.

The overall tone going into Microsoft's quarter is one of skepticism. Stifel Nicolaus analyst Brad Reback questioned whether investors will care about Microsoft's results. Reback said expectations were muted, but Microsoft probably benefited from building channel inventory for Windows 8.1 systems.

Fortunately for Microsoft, expectations are low enough for the company to deliver a few surprises. Going forward, Microsoft is going to have to resolve those nagging questions about its business and future.

Related: Demystifying Microsoft's new financial reporting structure

Topics: Enterprise Software, Microsoft

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  • of course

    all their so called "success" is based on corruption and government protection.

    now that they lost that and google because no1 nsa partner, microsoft is becoming as it always should have been: irrelevant.
    • Really?

      Microsoft will not be irrelevant for many years to come. They still seriously make money even with various failures.
    • Of Course

      all of your so called "posts" are based on corruption of facts protection.

      now that you have lost that ljenuxis is what he's always has been: irrelevant.
      • RE: OfCourse

        I honestly don't know where he gets his koolaid from or what drugs hes on, but I don't any of it. Brain damage is a bad thing.
        Those who hunt Trolls
    • You might want to learn some history...

      if you think they should have been irrelevant in the past. Do you like computers? Thank Microsoft, silly child.
    • ljenux, for real?

      ljenux, I am astounded by the absolute ungrounded, uneducated nature,of your comment. Do you truly believe that, or is it popular in your circles to comment this way? I seriously ask you to research your facts, before you comment...
  • Microsoft's Q1: New reporting structure, same old problems

    I'm not worried about it. Microsoft has been profitable quarter after quarter. Microsoft is a company that has learned to adapt. Keith Weiss shouldn't worry either about his 3 points. Microsoft is doing a good job of filling them. They have shown their vision of the future, they are already a leader in the cloud, and they have people internally that can manage a large number of employees. Analysts are worrying over nothing.
  • Investors are not Microsoft's concern

    What investors think about Microsoft shouldn't be a priority. Microsoft needs to continue to focus on Customers, executing the vision and building the best products possible.

    If they do, investors will take care of themselves. Actually they won't since investors only care about short term (short sighted) actions and Microsoft has always operated for the long haul.