Microsoft Corporation (MSFT) Earnings: Cash Your Dividend Checks and Twiddle Your Thumbs

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After blowing $7 billion on a mistimed bid to muscle its way into the communications hardware business via Nokia, Microsoft Corporation (NASDAQ:MSFT) has fallen into a pattern of taking short cuts. This past quarter may have been no different, but some investors are hoping for more optimistic news while MSFT all the while holds out for longer-haul growth initiatives to hit the field.

Microsoft Corporation (MSFT) Earnings: Cash Your Dividend Checks and Twiddle Your Thumbs

What Microsoft stock holders need is a breakout hit. That could be its new generation of Surface tablets, finally hitting commercial critical mass. Microsoft CEO Satya Nadella is definitely pouring enough ad money into the product, but that isn’t a real guarantee of success — and the only way MSFT can dazzle in the months ahead is if one of its keystone products leaps out of the fold.

Last quarter’s sales growth rate of 9% for the Surface simply isn’t enough to counter the broader drag evident in its slowing tablet, smartphone and even Xbox sales.

And it unless it’s back-to-school season was particularly spectacular, I’m not all that optimistic that this quarter brought something game changing to the table. Even if the company unveils something astounding next week at the Windows 10 preview, it won’t hit the market before next year.

The most likely scenario is that MSFT might report 1% to 2% of incremental per-share earnings gains tomorrow. That’s not a disaster. The market is comfortable cashing dividend checks while waiting for that long-term innovation to pay off. Most investors are aware MSFT hasn’t been a hyper-growth company for a long time. Instead, management is focusing on streamlining the margins in order to keep squeezing pennies out of a mature franchise.

A company like that rarely misses by a mile — and management has learned to trim to make their targets. They cut 2,850 additional jobs last quarter to buy a little more wiggle room this quarter, so if there was a lot of danger of the numbers deteriorating further, they would have gone back to the payroll. Otherwise, any incremental upswing in any of the company’s business lines — hardware, enterprise solutions, the cloud — will probably be rewarded by Wall Street.

We’ll find out more tonight when the numbers are released, but look for more LinkedIn Corp (NYSE:LNKD) integration plans on the conference call, as that will give you a clue where MSFT will take action next. At next week’s Windows 10 event, any hardware buzz at all will be encouraging.

There haven’t been too many rumors circulating the Street, so I have the feeling we can understand the event as another message to the faithful: business as usual, quarter after quarter.

Hilary Kramer is the editor of GameChangersBreakout Stocks Under $10High Octane Trader,Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.

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