Microsoft Corporation (NASDAQ:MSFT) releases the results from its September quarter on Oct. 24, and analysts at BGC have reduced their estimates for the company. They believe the company’s current fiscal year, which started on July 1, will offer a bumpy ride for investors. However, they suggest that the company could turn a bit more positive approaching the beginning of the next fiscal year.


PC declines mostly priced into Microsoft shares

BGC analyst Colin W. Gillis issued a report this year reiterating his Hold rating and $31 per share price target on Microsoft Corporation (NASDAQ:MSFT). He reduced his September quarter estimates and expressed continued concern about the company. He notes that the PC market has recorded its sixth year of declines in a row. During the third quarter, PC shipments fell 7.6 percent year over year to 81.6 million, according to IDC. He doesn’t believe the market will return to its 96 million unit peak in September 2011 any time soon, if ever.

Gillis believes that the decline in the PC market is already mostly reflected in Microsoft’s current stock price. He said his big area of concern is about the company’s biggest revenue stream, which is Microsoft Office. He suggests that this software suite might be the next area which will begin to show weakness because of the decline in the PC market. He notes that Microsoft Corporation (NASDAQ:MSFT)’s competition continues to target its productivity suite.

Other problems for Microsoft

The analyst also points to ongoing restructuring efforts at the company, which might create “organizational turmoil” which could be a headwind on the company’s September and December quarter results. He notes that a new CEO does offer an opportunity to reshape Microsoft, but it also presents risks like “’the transformative acquisition’ that turns out to be a dud” or attempts to “unlock conglomerate value” that just don’t work out. He also said that if Microsoft decides to “stay the course,” some investors might be disappointed.

Gillis believes Microsoft Corporation (NASDAQ:MSFT) must focus on improving its position in the smartphone and tablet markets and cutting its losses in search. He also suggests that Microsoft’s planned acquisition of Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) could provide a negative impact on Microsoft’s earnings because of Nokia’s history of losses. That acquisition is expected to close early in 2014.

September estimates for Microsoft reduced

The analyst cut his revenue estimates for the September quarter to $17.9 billion, which is a year over year growth of 11.9 percent but a sequential decline of 10 percent. He is just slightly ahead of consensus on revenue estimates ($17.8 billion). He estimates earnings of 56 per share, compared to last year’s September earnings of 53 cents and last quarter’s earnings of 59 cents. Consensus estimates indicate expectations of 55 cents per share.

He’s looking for $6.9 billion in revenue for Microsoft Corporation (NASDAQ:MSFT)’s Devices and Consumer division and Commercial revenue of $10.9 billion. He believes Corporate and Other revenue will post a loss of $.7 million.

As of this writing, shares of Microsoft Corporation (NASDAQ:MSFT) were up more than 1 percent.