Thomas Weisel analyst Tim Klasell raised his revenue estimates and price target for Microsoft on Tuesday on an improved outlook for hardware shipments, overall IT spending and a reduced cost structure.
As much as 42% of Microsoft s revenue is related to server and PC shipments, Klasell says. After accounting for higher shipment estimates, Klassel says Microsoft could record revenue of $60.3 billion in 2010, up from his previous estimate of $59.1 billion and slightly better than the consensus of $60 billion.
Better cost controls don t hurt, although investors are skeptical about their sustainability.
The bottom line: Although there is still some concern amongst investors that the company will return to more liberal spending ways as soon as growth returns, we think the company deserves some credit for reducing its cost base, wrote Klassel, who also upped his EPS estimate for fiscal 2010 to $1.86, or 84 cents a share on a non-GAAP basis.
Advanced Micro Devices Down
Advanced Micro Devices (AMD)
Rather, this dip might be a function of some year-end profit taking, says Canaccord Adams analyst Robert Burleson. I think that it s just performed very well up until last week, and it could be that there is a little rotation out of the group, says Burleson.
AMD and many of its peers are near their 52-week highs, and selling this week could reflect some shuffling of positions for year-end, he says.
The bottom line: There really isn t news at this point, except good news in terms of retail demand and the outlook for the PC market next year, says Burelson, adding that AMD and others already moved another leg up in the first few weeks of December in anticipation of that news.