SAN FRANCISCO – Microsoft’s
report on the quarter late Tuesday
will also be a report card on CEO
Satya Nadella’s efforts to retool the
storied company for a new
technological era.
The Redmond, Wash-based
company, which reveals its fiscal
fourth-quarter results after the bell,
is expected to report adjusted
earnings per share of 58 cents on
$22.1 billion in revenue, according
to analyst estimates provided by
S&P Global Market Intelligence.
Under Nadella, who took over from
Steve Ballmer in February 2014,
Microsoft has pivoted away from its
software licensing model and
towards a cloud- and mobile-first
strategy that has sent the stock up
30% in two years to $53.
But while most analysts remain
upbeat about Microsoft’s prospects,
doubt about the company’s ability to
reestablish itself as a dominant
force has crept in on the heels of
third-quarter results that included a
6% decline in revenue to $20.5
Microsoft to buy
LinkedIn for
$26B in cash,
its biggest deal
“The last quarter was viewed as
disappointing and indicative of the
issues Microsoft is facing,” says
Scott Kessler with S&P Global
Market Intelligence, pointing to the
shrinking PC market, fierce
competition in the enterprise cloud
space and its poor showing in the
smartphone market.
To that list of woes, Kessler now
adds inevitable foreign currency
impact on revenue after Britain voted
to leave the European Union last
month, a move that sent markets
and currencies reeling.
“Microsoft still has a lot of work to
do,” he says.
On the plus side of the ledger is
continued adoption of Windows 10, a
free upgrade that quickly found its
way onto 350 million devices.
Microsoft’s Azure cloud is second
only to dominant Amazon Web
Services and accounts for $8 billion
in annualized revenue. Nadella has
said he is aiming for $20 billion in
cloud revenue by 2020.
And monthly active users of Xbox
Live continue the gaming
service’s double-digit annual
LinkedIn buy
escalates cloud
Nadella continues to grow the
company through acquisitions, its
most dramatic being the $26 billion
plan last month to purchase
professional networking site
LinkedIn. The proposed deal is seen
as a way to further lure enterprise
customers and compete in the
lucrative software-as-a-service
business dominated by Salesforce,
Oracle and SAP.
“I like this deal, but now the key is
just not to wreck (LinkedIn),” says
Colin Gillis, analyst with BCG
Partners. “If you see (LinkedIn CEO)
Jeff (Weiner) heading for the door,
you know it’s over. But if they can
effectively integrate LinkedIn into
Office, they’ll have something.”