Found this article interesting, I thought Microsoft was profiting? delete if duplicate.
By Eric Savitz
Sometimes the good news is the bad news. Or vice versa.
Consider, for instance, today’s call on Microsoft (MSFT) by Caris & Co. analyst Curtis Shauger.
In a research note today, Shauger warned that weakening Xbox sales were likely to hurt top-line results for both the fiscal first quarter ending September and for the June 2010 fiscal year. Shauger trimmed his Q1 revenue forecast to $12.3 billion from $12.8 billion; for the full year he goes to $59.1 billion from $59.9 billion. The cuts specifically reflect lower expectations for Xbox 360 sales, which he says are getting hit by a combination of Microsoft’s price cuts on the consoles, weaker end demand and competitive pricing moves by Sony (SNE) on the Playstation3 .
The irony is that, as Shauger notes, hardware unit sales are dilutive to earnings - the company loses money every time it sells one. Ergo, he raises his EPS forecast for the quarter to 31 cents from 29 cents. The full year forecast remains $1.70.
Shauger keeps an Average rating on the stock, and remains cautious on the shares; he raised his price target today to $23, from $21, which is still below yesterday’s close at $25.77. He remains concerned about “the mounting pressure on its market position and business model,” and asserts that margins could come under pressure as more services move to a cloud-based architecture.
MSFT today is up 23 cents, or 0.9%, to $26.
