Microsoft Shares Rising
Microsoft Corp. shares rose almost 6 percent in heavy trade on Wednesday on a rumor that the company would pre-announce that it expects to beat its fourth-quarter forecast, analysts said.
But the company declined to comment on the rumors circulating in the markets, saying it has not provided an update to its guidance since reporting results last quarter.
Analysts said they expected Microsoft to beat its own forecast but not to pre-announce that result. Microsoft has a history of reporting higher numbers than expected because its guidance is conservative, they said.
Microsoft shares closed at $55.54, up $2.97 on the Nasdaq, making it the third-largest net gainer for the day on Nasdaq.
About 68 million shares were traded on the exchange, more than twice the average volume over the past 30 days.
"I'm pretty comfortable they're doing better than the consensus forecast," said Robert Austrian of Banc of America Securities.
Analysts polled by Thomson First Call were expecting the Redmond, Washington-based company to post earnings per share of 42 cents and revenue of $7.06 billion, on average.
Microsoft's guidance for the quarter ending in June is for earnings per share of 41 cents to 42 cents and revenue of $7 billion to $7.1 billion.
Austrian said Microsoft shares have been the beneficiary of volatility in the shares of smaller software companies as investors seek a safer haven in the sector.
In addition, Microsoft's proven business model and a new licensing strategy that was expected to boost sales have supported the stock, he said.
"This preference for Microsoft's increasingly reliable model has been helping their shares outperform for a month or two," Austrian said. "Microsoft is about the most stable software company there is."
Other software companies have been issuing earnings warnings and getting downgraded by brokerages in recent weeks. Goldman Sachs cut its estimates for about two dozen software companies last month and then did the same for Siebel Systems Inc. this week.
"Many of the smaller to medium-size software companies are missing (their estimates), so investors may have decided to park their money in more established companies, like Microsoft," said Ken Kiarash of Buckingham Research Group.
"Sales of Xbox are going well, Visual Studio .Net is going well," he said of several Microsoft product releases. "Overall, they're having a pretty decent quarter."
Shares of Microsoft have lost about 21 percent since the start of the year and almost 23 percent over the past 52 weeks.
---TXB
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