Financial anaylsts are reacting to Microsoft’s warnings about sales of PCs dropping faster than anticipated.
At a meeting with analysts in Las Vegas, Bill Koefoed, Microsoft general manager of investor relations, and Tami Reller, chief financial officer and chief marketing officer of Windows, warned that sales of PCs would likely drop faster than anticipated in the fourth quarter, particularly because of floods in Thailand, where many computer parts are made.
Nomura, which is hosting a Nomura Technology Conference in Las Vegas where Reller talked about the anticipated decline, had originally estimated that PC shipments would decline 1 percent in the December quarter year over year. Now Nomura analyst Rick Sherlund has revised that estimate to a decline of more than 7 percent. For the March quarter, Sherlund revised his estimate to a 13 percent year-over-year decline (vs. an earlier estimate of an 11 percent decline.)
Goldman Sachs, which estimated a 3 percent decline year-over-year for PC shipment growth for the fourth quarter 2011, and a 1.2 percent decline year-over-year for Windows, stands by those estimates.
The Goldman Sachs analysts’ note goes on to say:
However, if Windows revenue did decline 3%, that would imply MSFT’s total revenue for 2QFY12 would come in $200mn light at 20.8bn vs. consensus of $21.0bn (assuming the other segments come in line) with the impact to EPS being $0.01, all else being equal.
For the March quarter, our IT Hardware team expects PC units to decline 8% yoy and consequently we see Windows revenue declining 4.0% yoy to $4.27bn (consensus: -1% to $4.42bn). We continue to believe that consensus EPS forecasts for 2QFY12 remain too high at $0.77 (GSe $0.75), given the potential Windows downside and given management’s comments about Kinect shipments (18mn thus far) and Xbox live subscriptions (40mn currently) are in line with our forecasts. Our 3QFY12 EPS estimate of $0.59 is similarly below consensus ($0.61).
Microsoft shares are trading at $27.87, up 3 cents.