Microsoft: preparing the way for future growth

Microsoft posted good earnings yesterday and yet their shares declined .67% in after hour trading.  Microsoft profit increased 6% in 3Q on good corporate sales from products like Office 2010. Business sales increased 8% to $ 5.62 Billion. Microsoft’s fiscal first-quarter earnings rose 6 percent to $5.7 billion or 68 cents per share, matching analyst estimates. Revenues from July-September increased 7 percent to $17.3 billion to surpass Wall Street estimates. Q1 Sales growth is 7% YOY which is slightly lower than in other quarters (Q4 was 8%, Q3 was 13%).  Entertainment & Device growth for Q1 2012 is 10% compared to 15.7% in Q4.

Windows sales were not robust and are showing signs of weakness as tablets are gaining momentum and stealing market share from PC’s on the retail end. But Microsoft is gearing up for some renewed growth with the new release of Windows 8 which will be available in the months ahead (release date is not yet public) and will run on tablets equipped with ARM chips. Expectations are high for the new release of Windows 8 which will come equipped with live tiles and many updated features.

Microsoft will benefit in the months ahead from a closer alliance with Nokia. The hopes are high for Nokia’s new smartphone which will be released in the near future and operate on Windows OS instead of Symbian OS, their failed operating system. Nokia has high international reach and is looking to make new inroads with their smartphones.

Microsoft and Yahoo-

A report in the Wall Street Journal says the CPP (Canada Pension Plan)  Investment Board and private equity firm Silver Lake Partners are working together with Microsoft to consider a bid for Yahoo. Microsoft would provide the majority of the financing for the deal. Microsoft is already exclusively operating Yahoo’s search engine.

Microsoft has recently closed it acquisition of Skype and is working to integrate the internet communication company with Microsoft products. Microsoft is working behind the scenes to increase their profit margins and position the company for future growth in the areas of software development, gaming (Kinect), internet communication, and search.  Microsoft increased their dividend and is poised to be a good stock for value minded investors who are searching for growth.




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