TechWeek: Microsoft Muddies the Waters

"While some are interpreting this as a statement that there is some issue with consensus estimates, we would take Ballmer literally and note that the absence of a 'major disconnect' does not logically necessitate that there is a minor one. [Emphasis in original.] Sanford Bernstein does not have an investment-banking relationship with Microsoft.

I guess that's one way to look at it. But if I had skin in this game, I'd wait for the April earnings call rather than trying to read Steve Ballmer's mind or parse his prose.

Salesforce's Moment of Truth

With shares up 30% in the last three months, is Salesforce.com(CRM Quote) ready to take a breather? We'll know next week.

Wall Street has been buzzing with rumors that the provider of on-demand software had a blowout January quarter. But expectations have set the bar for the fourth-quarter earnings call very high.

Citi analyst Brent Thill raised his target price to $60 from $44 this week, saying the fourth quarter "was very strong, driven by enterprise customer momentum."

The company's ability to penetrate top-tier businesses has always been something of a question mark, though recent wins at Dell(DELL Quote), where Salesforce grabbed 15,000 seats, and at Cisco(CSCO Quote) where Salesforce doubled its presence, have blunted some of that criticism.

That kind of news, of course, can be something of a double-edged sword, notes Thill. "Expectations have clearly risen, possibly to lofty levels, and if earnings results on Feb, 21 don't meet the high bar, the stock could sell off," he wrote in a research note. Citi does not have an investment-banking relationship with Salesforce.com.

Cowen analyst Peter Goldmacher is quite bullish on the stock and on the quarter, saying: "I think the quarter will be better than most people think, and I think most people think it's going to be pretty good. The subscriber count is going to blow through expectations on the back of some really big deals at Dell, CA(CA Quote) and Merrill Lynch(MER Quote).

However, he added in an interview that "Some of the larger deals were done at significant discounts, and by significant I mean 70%-plus discounts." Cowen does not have an investment-banking relationship with Salesforce.com.

Wall Street is expecting Salesforce to earn 7 cents a share on revenue of $142.9 million.

---

TechWeek Scorecard
Index	Closing	Change
Nasdaq Composite	2496	1.5%
Philadelphia Semiconductor	473	2.2%
Goldman Sachs Software	188	1.6%
TSC Internet	259	0.8%