Thursday after the close, Microsoft MSFT reported earnings. One conclusion that jumps out from the report and conference call is that Microsoft has overcome the so-called ‘death of the PC.’
Microsoft is generating about 70% of its profits from its commercial business, which is growing at about a 10% rate, yet Microsoft is trading at forward P/E (fiscal year ending June 30, 2015) of about 11. The stock looks inexpensive.
The second reason holding Microsoft’s valuation in check has been declining PC sales and the company not performing well in mobile. PC sales are still declining. According to Gartner, PC sales fell 8.6% to 80.3 million units in the last quarter. IDC reported that sales fell 7.6% to 81.6 million units. Most of the decline in PC sales is coming from the consumer sector. In spite of the PC sales trend against it and poor performance in the mobile sector, Microsoft’s consumer and device revenues grew by 4% to $7.46 billion. This indicates that Microsoft may be hitting an inflection point on the consumer side.
In quite a contrast to the consumer side, commercial revenues grew 10% to $11.2 billion.
Microsoft earnings came at $0.62 vs. analysts’ consensus estimate of $0.54. Revenues came at $18.53 billion vs. consensus of $17.79 billion…Read more at Forbes
