After the closing bell on Thursday, Microsoft (NASDAQ:MSFT) reported fiscal Q2 earnings of 76 cents per share, which was a penny ahead of expectations. I think these results were decent despite widespread claims that Windows 8 has been a bust.
For the quarter, Microsoft’s profits dropped by 4% compared with last year. Quarterly revenue rose 3% to $21.46 billion, which was just shy of Wall Street’s forecast of $21.53 billion. The Windows division makes up about one-quarter of Microsoft’s overall business, and sales there rose by 11%. However, the company is getting slammed in its entertainment and office divisions.
To be sure, Microsoft has its share of problems. The online division is a financial black hole, and Xbox revenue is falling rapidly. On the plus side, Microsoft is doing better with business customers. That’s often been a tough nut for MSFT to crack. They were able to sign up more customers to long-term contracts, which bodes well for future business.
The problems Microsoft is having are plaguing the entire PC sector, and that’s one of the reasons why the company has
to take Dell (NASDAQ:) private. I think one analyst when he said, “Microsoft is evolving really into an enterprise software company.”
The bottom line is that Microsoft is a company with a lot of problems. But the share price is well beneath the fair value. The stock is currently going for less than 10 times this fiscal year’s earnings. Microsoft remains a good buy up to $30.
