Analysts at Citi Research anticipated that Microsoft Corporation (NASDAQ:MSFT)’s Enterprise business will deliver a solid performance for the second quarter of the current fiscal year.
Citi Research analysts Walter Pritchard and Kenneth Wong stated that the strong performance of the Enterprise business of Microsoft Corporation (NASDAQ:MSFT) was propelled by its recent product cycle including Win Server, SQL, and MBD server products. The software giant’s initiative in pushing its premium SKU’s also contributed.
Xbox Lags, Consumers Might Be Waiting For Microsoft Xbox One
Pritchard and Wong also noted that Microsoft Corporation (NASDAQ:MSFT) is gaining solid traction for the Office 360 and the company’s broader collaboration and communications products.
The analysts observed that the Entertainment and Devices Division (EDD) of Microsoft Corporation (NASDAQ:MSFT) is showing weakness prior to the launching of the Xbox refresh. Pritchard and Wong believe that the sales of the Xbox are trending below their 1.1 million units estimate. The analysts speculated that consumers might be holding back their plan to buy the device in anticipation of the release of the Xbox One.
Bing and Online Picking Up Steam
With regard to the performance of the company’s search engine, the analysts observed that market share of Bing is a bit positive. Pritchard and Wong expect that Microsoft Corporation (NASDAQ:MSFT)’s losses in Online should continue to trend slightly lower.
The analysts believe that the 2014 OpEx of Microsoft Corporation (NASDAQ:MSFT) will not change. According to Pritchard and Wong, the consensus estimate of Wall Street analysts at $3.06 was high compared with their estimate at $2.77.
The analysts said, “We’ve isolated the source being higher street Xbox revenue paired with higher GMs is directionally inconsistent. We also believe some have begun hoping for a reduction of OpEx along with a broader restructuring. We believe this is unlikely and there could be some near-term pressure on stock if consensus EPS comes down.”
In addition, Pritchard and Wong reported that allthough the Enterprise business of Microsoft Corporation (NASDAQ:MSFT) outperforms its peers in the industry, the shares of the company needs Windows to maintain its outperformance. The analysts perceived more medium-term catalyst from Oracle Corporation (NASDAQ:ORCL), which remains as their top mega-cap software stock.
Microsoft Corporation (NASDAQ:MSFT) is scheduled to report its second quarter earnings results on Thursday, July 18 after the closing of the market.
