Microsoft earnings: What to watch

While much attention these days has centered around whether Microsoft will buy a big name to boost its online business, expect a lot of attention on Thursday to focus on the areas where Microsoft actually earns money.

The Windows business in particular will get attention after showing less than stellar results last quarter. Microsoft has forecast its Windows client unit will show between 7 percent and 11 percent growth for the quarter.

Overall, Microsoft said in April to expect earnings of 45 cents to 48 cents per share on revenue of $15.5 billion to $15.8 billion. (First Call has analysts pegging earnings at 47 cents per share, on revenue of $15.7 billion.)

As for the outlook for the current quarter, which stretches through September, analysts are currently expecting earnings of 49 cents per share, on revenue of $15 billion. It will be interesting to see where Microsoft's forecast comes in, as well as what it has to say about the broader economy and IT spending in particular.

Expect analysts to push for some more details on Microsoft's plans to significantly boost Windows marketing, particularly as Apple is gaining not only mindshare with its anti-Vista ads, but also market share.

Here's another thing I'm going to be watching--piracy rates. Last quarter, the company noted an uptick in piracy rates after making some significant gains. With Vista Service Pack 1, Microsoft also made life for pirates somewhat less onerous.

And of course, folks will be hanging on every word regarding Yahoo, AOL and anyone else Microsoft is thinking about buying. I would expect company officials to have only the expected things to say, that they are still interested in transactions that would accelerate their growth, strong go-it-alone strategy, etc. More interesting will be if they give any of the investment levels that go-it-alone strategy will entail.

We'll have the earnings report just as soon as its out, as well as some insight ahead of the earnings conference call and then frequent updates once the call gets underway.

[izaninazi]

It's important to note that piracy is actually good for Microsoft, especially in emerging markets like China and India. In this way MSFT gets users "hooked" on Windows before they can afford MSFT high prices, then when they can afford them Microsoft will reap the benefits. This has been Redmond's tactic all along in China to the best of my knowledge.

[Kwasiowusu]

Gotta agree with you there. The # 1 reason why Windows is # 1 in China is because of piracy. The Chinese simply buy a "naked" cheap PC for say $250, with no operating system in it, then go to the street corner and buy a pirated copy of Windows for $2, and viola! they are in business, and the Cinese have ended up hooked on Windows, and most Chinese developers are writing programs for Windows. For the same reason, Apple's Mac's have gone exactly nowhere in China, because they are far more expensive than those cheap PC's, and come with the OS already pre-installed. Rampant Windows piracy has also effectively prevented Linux from dominating in China.n business.

[barryblo]

I know Microsoft made quite a deal about piracy last quarter, but it was barely mentioned this quarter. On a search of Microsoft's earnings call transcript, the word piracy was only even mentioned in passing 3 times:

http://seekingalpha.com/article/85614-microsoft-f4q08-qtr-end-6-30-08-earnings-call-transcript?page=-1&find=piracy