When Microsoft announces its fiscal third quarter earnings after the market closes today, most analysts will zero in on one data point--how Windows is selling.
Windows--one of the three engines that powers Microsoft sales and profits, along with Office, and server software--seems likely to have a sluggish quarter. Two weeks ago, research firm IDC surprised industry watchers with a report that global PC shipments declined 3.2 percent during the first quarter, compared with the year-ago period, citing "cautious business mentality and waning consumer enthusiasm."
"Clearly, the PC market is under pressure," said Adam Holt, a Morgan Stanley analyst. And since the vast majority of PCs run Windows, Microsoft earnings are under some pressure too.
There's little doubt that Microsoft will report its best-ever fiscal third quarter revenue. But with slowing PC shipments, Windows, which should account for about 28 percent of Microsoft's overall sales this quarter, will be a drag on earnings. Slowing sales of Windows, long the fuel for Microsoft's economic engine, is cause for some concern.
On Tuesday, Holt cut $200 million from his projections for Windows sales in the fiscal third quarter to $4.47 billion, a 4 percent decline from the year-ago period. And since Windows accounts for about 28 percent of Microsoft's overall revenue, Holt nudged his overall quarterly estimates downward, expecting the company to earn $4.47 billion on sales of $15.8 billion.… Read more