Q4 Preview: Microsoft (MSFT) May Open 'Windows' to Solid Quarter

Microsoft (Nasdaq: MSFT) shares are up modestly in afternoon trade Thursday, several hours before the company is set to report its latest quarterly results. The tech giant generally reports just after the market closes, usually not later than 4:10pm ET.

Microsoft is expected to report fourth-quarter earnings of 58 cents per share on revenue of $17.25 billion. The earnings number would represent 3.6 percent quarter-over-quarter growth, and a 3.3 percent decline from the same period last year.

Barron's called Microsoft a "value play" back in June. One astute writer for Forbes pointed out, while it seems Microsoft is lagging in innovation, this is likely the result of engineers who trained to patent ideas as they come about. The process usually takes longer, but Microsoft, with its thousands of engineers, can afford a few to take a leave as the company seeks a patent for coding. Smaller growth companies don't implement the same scheme, as they try to focus their limited resources more on gaining market share and money. A similar pattern might be seen at IBM (NYSE: IBM), which is the largest submitter of patents to the U.S. nearly every year. With Microsoft holding a bunch of patents on ideas, it now has the ability to draw another revenue stream, as contrived as that may sound.

While this may have been familiar information for some, it's worth pointing out again.

Microsoft's stock price did not make too many impressive moves in the quarter, gaining just 3 percent year-to-date at the end of June. Shares are up 4.4 percent since, compared to a 1.8 percent move higher in the S&P 500 over the same course. Microsoft has traded in a range of $23.32 to $29.46 over the last 52-weeks.

Data from Streetinsider's Ratings Insider has 23 analysts with a Buy rating, 10 at Neutral, and none recommending to Sell. The analyst price target average is $32.55, with a low of $28 and high of $37.

Analyst Comments
Goldman Sachs is modeling for revs of $17.2 billion and EPS of 58 cents. Based on checks, the firm sees Microsoft coming in-line to slightly-ahead of Street views and its own estimates. In the quarter, Windows revenue is expected to be $4.65 billion, slightly shy of the $4.773 billion consensus. Goldman sees an increase in Microsoft's quarter dividend to 17 or possibly 18 cents this year.

"IDC estimates global PC shipments rose 2.6% yoy which compares to the 0.4% yoy increase estimated by our IT hardware team." Goldman is also modeling for Server and Tools revs of $4.6 billion and $5.8 billion for Microsoft Business Division.

BGC Capital sees revs of $16.98 billion and earnings of 59 cents per share. BGC says sales of Office2010 units, at over 400 million, were 50 percent ahead of Office2007 over the same period. With Windows XP taking up about 51.1 percent of the global market, and Windows 7 only at 27.1 percent, there is plenty of room for more refresh.

"Tthe bear case that Microsoft cannot serve the consumer is a bit tired given that the Kinect is the fastest selling consumer electronic product in history according to Guinness World Records."Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of the release.

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