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Is MSFT Performing Well?

January 26, 2014 | About:

Microsoft (NASDAQ:MSFT) finally has a reason to be happy. After a very average performance for most of the last year the company’s shares rallied somewhere around 3.5% in the last quarter. This was reported on Thursday after the company released its quarterly report. The release of this report marks the exit of Steve Ballmer from the coveted post of the CEO. With his stepping down, many an investor heaved a sigh of relief, particularly those who weren’t too happy with the way the company performed under Ballmer. For the record the company earned $0.78 in the last quarter with revenues of around $24.52 billion- a rise by approximately 14% from the last year. The last two months saw the shares of Microsoft take a hit. The analysts have opined that if the shares are traded at above $40 in the coming months, the deficit would be more than made up for. Let me take you through the tech-giant’s performance over the last year:

Devices and Hardware segment: 

If we look at this particular segment of Microsoft we find that the performance has been better than the other segment. The revenues rose by an astounding 68% to around $4.7 billion. The launch of Xbox One was particularly instrumental in boosting the sales for the company. In fact, Xbox alone accounted for $1.2 billion sales for the company. The company sold around 7.4 million consoles of Xbox One. In spite of being on sale for only 5 weeks, the huge volume of sales created massive revenues for the company. Microsoft’s promise that the Xbox console would be much more than just a gaming platform has not gone in vain as the customers are really liking it. It is now in the hands of Microsoft whether or not make use of this opportunity and leverage on the consumer-expectation.

Surface Disappoints:

The surface segment hasn’t quite lived up to the hype. Revenues from the Surface devices though have doubled from the last year’s figures but this happened off only a small base. Compared to that, Apple’s iPad generated around ten times more revenues than the Surface Tablets.

The growth in the sales of the Surface tabs is visible but their market share is quite meager. This apart, the segment is running a loss of around $932 million. Thus even though the tabs unit of Microsoft is growing, there is still a long way to go for the company if building a formidable position in the tabs market is what they are looking forward to.

Other aspects of the business:

If we look at the licensing business of Microsoft we observe a year over year steady decline of 6% to $5.4 billion. This has been a result of the declining PC sales. The overall revenue from different sectors has gone down. The Windows revenue was down by 3% whereas the Office revenue went down 24%. This shows that the PC market has further weakened.

The enterprise business of Microsoft has particularly performed well. Overall revenue went up by 7% to $10.89 billion. The PC demand by the enterprises has been much more resilient than the consumer demand for PCs. The analysts predict that the company’s new IT services will bolster the revenue in 2014. The segment has shown a formidable performance in 2013 as well.

To Conclude:

After having disappointed for most part of the year, Microsoft showed a good performance in the last quarter. Consumer hardware is doing just fine and the acquisition of Nokia seems to have occurred at the right time. The consumer revenues for the Windows seem to be weak owing to the declining PC market. The experts predict that Microsoft will have earned $2.75 by the end of this quarter. This will boost the dividend by at least 3.2%. This makes MSFT a fine choice for investment. The real story, will however be revealed once the quarter ends. Till the time, the investors must keep in mind that the company has $84 billion in cash and around $21 million in debt.

Rating: 2.4/5 (5 votes)


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