There are many ways to characterize Microsoft's (MSFT) latest earnings report. They're being called everything from decent to disappointing — to an outright call to man the lifeboats. Officially, the company's 16 cent per share shortfall — $0.59 versus $0.75 consensus estimate — is its biggest bottom-line miss in 38 quarters, Factset data shows, going all the way back to January 2004.
As my co-host Jeff Macke and I discuss in the attached video, there's plenty not to love about the quarter, the company and its management. In addition, it appears that Wall Street is catching on quick that the glory days of the $295 billion behemoth built by Bill Gates are behind it.
"Microsoft, at this point, is in to cutting. They're hurting themselves on purpose," Macke says of the company's move to add retail outlets in a bid to sell more of its highly discounted and unpopular Surface tablets. "The only question remaining with Microsoft is: Why is [CEO] Steve Ballmer still there?"
Along that front, investors are also concerned about the timing of a recent corporate re-organization, coming just a week before Thursday's profit report, yet without so much as a whisper about the obvious shortcomings that are now known to the world.
Part of the reason for the severity of the sell-off today, which has evaporated over $25 billion of market value, is the fact that the stock is (was?) having a great year. Its prior 32% year-to-date gain makes it the third best performer in the Dow Jones Industrials (^DJI).
It's also worth noting that those gains came at a time of waning confidence from Wall Street, where the number of analysts who currently rate the stock a "Buy" has now sunk to a 20-year low of 35% (down from 60% as recently as April), Factset data shows.
"Those five-year highs — $36 — you will never, ever in your life see those highs again," predicts Macke. And that only begins to scratch the surface of the challenges the world's biggest software/hardware/gaming/service/consumer goods company must face.