What follows is an excerpt from Canaccord Genuity’s Morning Coffee newsletter.
Microsoft Corp. (
NASDAQ: MSFT,
Stock Forum) rose 1.2% to $31.78 Monday after last week’s trouncing, and leaving the company with a market cap of $265.4 billion, based on 8.3 billion shares outstanding.
The stock fell the most in four years Friday after fourth quarter profit missed analysts’ projections by the biggest margin in at least a decade as demand weakens for personal computers running Windows. Results were hurt by a $900 million writedown of Surface tablet inventory, shaving 7 cents a share from earnings.
Excluding that, profit was 66 cents a share, Microsoft said Thursday, trailing analysts’ 75-cent prediction. Stung by a Surface device that few consumers want, the company faces a shift by consumers to mobile gadgets that offer many of the same features as laptops and desktops at lower prices.
CEO Steve Ballmer’s effort to focus the company on devices and services may reduce profit as both areas carry thinner margins than traditional software.
Microsoft’s outlook points to a weaker PC market, shifts towards subscription revenue and a pause ahead of the Xbox One gaming console release, all of which are expected to put revenue growth under pressure, analysts believe.
Xbox is the only device by Microsoft that has found a following among consumers and the new Xbox One is expected to launch this year.