Investors Question Microsoft (MSFT) After Results, Can Company Shake Their "Disappointing Ways"

Shares of Microsoft (Nasdaq: MSFT) are down 9% today after reporting truly disappointing fourth quarter results after the close, due to the weakness in the global PC and server markets.

On the top-line, Microsoft reported revenue of $13.10 billion which is down 17% from last year and well below the consensus of $14.37 billion. In fact, Microsoft even missed the "Street low" revenue estimate of $13.65 billion. Operating income, net income and diluted earnings per share for the quarter were $3.99 billion, $3.05 billion and $0.34 per share, which represented declines of 30%, 29% and 26%, respectively, when compared with the prior year period. The Wall Street consensus is $0.36.

A number of Wall Street's finest weighed-in on Microsoft following the results, mostly echoing investors disappointment.

One past bullish analyst, FBR Capital, used the earnings miss to downgrade the shares. FBR downgraded the stock from Outperform to Market Perform and cuts their price target from $28 to $25. FBR said while demand is stabilizing for both Microsoft and IT spending in general, they don't expect an improvement over the balance of this year. They said given Microsoft's 69% run-up from the March lows, shares will now likely remain range-bound.

But the disappointing Q4 results didn't deter all the Microsoft bulls. Deutsche Bank said their bullish thesis is based on their belief that Windows 7 will be one of the more successful OS releases ever and that the stock outperforms in front of OS releases. They said the weak Q4 results, while disappointing, does not change their investment thesis. Deutsche Bank reiterated their Buy rating and $30 price target.

Analysts at Bechmark were more cautious on the Windows 7 release, saying they believe that PC upgrades are far down the IT buyers' list. They kept their Hold rating on Microsoft.

So while Wall Street is hanging their hats on the Windows 7 release, investors better hope the company can shake their disappointing ways or the launch of Windows 7 could go the way of Microsoft's 4Q results - "worse-than-expected."

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