Microsoft (MSFT): End of Windows XP Cycle and Windows 10 “Prep”

Posted on Jul 22 2015 - 12:14pm by Sharpe Trade

For years, I have stated that new investors should tune into companies quarterly conference calls, presented to shareholders. The benefits are numerous and many.

It only generally takes one hour or so, every three months.

News items that hit the market do not catch you as much by surprise, leaving you to wonder “Why did this happen?

One can become familiar with the business with which one is invested.

One can listen to the board members of various corporations around the planet, as they attempt to manage businesses worth billions of dollars. You’re not listening to some doofus and his thoughts on the economy who has no stake in issues facing the economy. You’re not even listening to my thoughts on the economy. You are listening to board members discuss the very real issues they face as they manage corporations worth billions.

When I listen to the conference call of a company, I take some notes. And therefore … I thought that to help out new folks as they navigate conference calls, I would start posting my notes, as I’ve taken them. Perhaps, we can make this a continual feature here at Sharpe Trade with the stocks that we have mentioned in the Sharpe Income project.

Last night, it was the Microsoft (MSFT) call, that you can find here.

Microsoft (MSFT) – 4 Hour Chart

Microsoft MSFT Earnings Loss

So what’s the story for this quarter?

A few notes from my desk as I listened to the conference call

MSFT earnings 2015

This marks the end of Microsoft’s (MSFT) 2015 fiscal year.  So some time was spent on the call, reviewing their 2015 performance.  And Fiscal 2015 quite frankly, was a good year; building upon the successes of their previous years both in terms of revenue, their balance sheet and cash flow.

As far as this particular quarter?  Well, the Windows XP support cycle is coming to a close.  Their OEM  (think of it as folks who are not Microsoft, who partner with Microsoft and build computers pre-loaded with Microsoft’s software.  That sort of thing) revenue was down.  However, this needs seen as a ‘static’ event, as that Windows XP support cycle comes to an end.  Computer manufacturer’s and other partners are in essence, priming themselves for the launch of Windows 10 launch.  They hope to see revenues pick up from Windows 10, in the last half of 2016 Fiscal year.  We also had the impairment charge from Nokia hit this last quarter.

Reading articles around the net, some seem to be expressing concerns over Xbox and Windows phone.

To which I ask … well … are either one of these segments even 0.5% of Microsoft’s (MSFT) business?

If I was forced to put this quarter into a few sentences?

Fiscal 2015 was a fantastic year for Microsoft (MSFT), as we face a little static in decreases in OEM as the Windows XP ‘cycle’ comes to a close, and what looks to be a one time impairment charge.  However, this positions Microsoft well for the Windows 10 launch and the company looks to be in great shape longer term …

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