Microsoft Delivers a Stellar Quarter

Everyone knows Microsoft (NASDAQ: MSFT) holds a horde of cash, but many also question its ability to monetize on that latent value.  After the bell today, Microsoft delivered a blowout quarter, reporting EPS of $0.51 compared to analyst estimates of $0.46 on revenues of $16 billion compared to estimates of $15.3 billion.  This should help quell some of the recent concerns.

Microsoft has been particularly beaten down both in terms of share price and reputation as people have questioned the company’s ability to evolve in a dynamic technology environment.  Things are so bad that Steve Ballmer retirement rumors find their way to the Internet on a daily basis. Despite the negativity, we featured Microsoft as one of our long plays in the Premium Newsletter , and on the CBS Radio Stock Picker Segment, as a great way to weather the recent volatility storm taking hold of global markets.

Revenues came in higher on all four major subdivisions of the company, with the Servers and the Business segments delivering the biggest beats.  For the year-to-date, 175 million Windows 7 licenses have already been sold, contributing nicely to Microsoft’s earnings beat and the newest version of Microsoft Office continues to be a powerhouse money-maker for the company.  In our earnings preview for Microsoft, we highlighted the fact that Intel’s (NASDAQ: INTC) earnings gave investors an early clue as to the strong demand from enterprises in upgrading their technological infrastructure.

This earnings report should soothe investor concerns that Microsoft is not well positioned for the shift into the “cloud,” as the company demonstrated solid revenue growth in exactly the areas in which the cloud should theoretically chip away.  With the newly unveiled Kinect for Xbox, Microsoft is once again looking to turn the video gaming division of the company into a key driver of future revenue growth.

Afterhours, the stock is floating between unchanged and slightly negative.  After closing above the 50-day moving average for the first time since early May, Microsoft shareholders will be looking for the stock to hold above recent highs in the $25.50 area before starting a new move higher.

Microsoft looks to hold above its 50-day moving average following its earnings release.

Disclosure: No position.

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