Microsoft is poised to post modest sales gains and may see a slight dip in earnings per share when it reports its fiscal second quarter results after U.S. stock markets close today.
Results at the software giant will likely be hampered by hard-drive component constraints that have hit the PC business recently, the result of severe flooding in Thailand where many drives are made. At the Nomura Technology Conference held last week, Tami Reller, the chief financial officer and chief marketing officer in the Windows and Windows Live Division said the company expects fourth quarter PC shipments to drop more than the 1 percent that analysts were expecting.
In a research note, Nomura analyst Rick Sherlund said PC shipments likely fell 7 percent. That led Sherlund to trim his quarterly revenue estimates for the Windows division by $317 million. For the quarter, Sherlund now projects $4.7 billion in Windows revenue, a 7 percent decline from the year-ago period.
The reduced number of PCs shipped also likely means fewer sales of Office than originally anticipated. That's led Sherlund to cut his December quarter revenue estimate for the Microsoft Business Division, home to Office, by $227 million to $6 billion. Those results would represent a 2 percent decline from the year-ago period.
With those revenue reductions, Sherlund now estimates that Microsoft will post a 2 percent gain in total quarterly revenue to $20.4 billion. The new calculations led him to reduce earlier earnings per share estimates by three cents to 75 cents a share, compared to 77 cents a share a year ago.
Growth from Microsoft's two other multi-billion dollar divisions should provide some needed counterweight to the flooding-affected businesses. The company's Server and Tools division continues to soar. In fact, by Sherlund's estimates, the division should grow 10 percent to $4.7 billion, putting it on par with the Windows group itself.
And Microsoft's Entertainment and Devices division, home to its Xbox gaming business, continues to boom as well. The Xbox was the top-selling game console last year, grabbing some 40 percent of all physical retail sales, according to NPD. What's more, the company's Kinect motion-sensing controller sold well for the second holiday season in a row. That should lead to a 13 percent sales jump for the division to $4.2 billion, according to Sherlund.