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NEW YORK (
Microsoft(MSFT - Get Report) shares have plunged 7.2% to $32.90 in after-market trading following an
extremely weak earnings report, reflecting the PC industry's terrible slump.
Microsoft earned 52 cents per share on $19.9 billion in revenue for its fiscal fourth-quarter. That was well below analyst estimates, who were expecting 75 cents per share on $20.73 billion in sales. In addition to the weak report, the company cut its operating expense guidance for fiscal 2014. It now expects to spend $31.3 billion in fiscal 2014, down from a prior view of $31.9 billion.
The company acknowledged the weak PC environment in its release. "While our fourth quarter results were impacted by the decline in the PC market, we continue to see strong demand for our enterprise and cloud offerings, resulting in a record unearned revenue balance this quarter," CFO Amy Hood said in the press release.
Here's what several analysts on Wall Street had to say following the report.
UBS analyst Brent Thill (Buy, $40 PT)
"With the stock +33% YTD FQ4 downside driven by the weak CQ2 for PCs will be reason for some investors to lock-in profits however we think the downside is limited given the potential for shareholder activism this fall, est'd 13% dividend hike in September and new clarity we expect from MSFT at its September analyst day (FAM) around the economic benefit and profit potential MSFT believes will accrue to shareholders from its structural shift to devices and cloud services."Citi analyst Walter Pritchard (Buy, $35 PT)
"Revenue of $19.9B was well short of our $20.6B and street $20.7B. All lines were light of our and street estimates, although enterprise was much stronger than revenue appeared (double digit billings growth). Our calculations suggest that Surface drove more than half the Windows shortfall. Xbox was light of our below street estimate. Reported EPS of $0.59 was well short of street's $0.78. A $900M inventory charge for Surface RT had a negative $0.07 impact, however even adjusting for this, $0.12 miss was driven by the above-noted revenue shortfall, higher COGs and OpEx. Unearned revenue was strong and more than made up for "weakness" in MBD and S&T."Credit Suisse analyst Philip Winslow (Outperform, $38 PT)
"Although continued weakness in the server and PC markets (combined with increased discounting of Windows into the OEM channel) pressured S&T and Windows revenue, respectively, unearned revenue of $22.4 billion well exceeded consensus of $21.5 billion, driven by the outperformance of MBD, as the run-rate of Office 365 increased to $1.5 billion from $1.0 billion last quarter. The ramp of Office 365 was faster than expected, shifting revenue at a faster-than-expected rate from reported revenue to unearned revenue."JPMorgan analyst John DiFucci (Neutral)
"MSFT meaningfully missed F4Q expectations in every business on the back of a difficult cyclical macro backdrop and secular pressure in the important PC market, though deferred revenue was strong indicating continued traction in enterprise business and the company lowered guidance for next year's operating expenses."
Written by Chris Ciaccia in New York