Microsoft Earnings Today Will Be A Satya, Surface Double Feature

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msft-stock3Today after the bell Microsoft will report its fiscal third quarter, calendar first quarter financial results. Analysts are expecting that the company will report $20.39 billion in revenue, and earnings per share of $0.63.

Those figures are not too impressive. Here’s the ditty from the year-ago quarter:

Microsoft reported its fiscal third quarter 2013 financial results, including revenue of $20.49 billion, and earnings per share of $0.72. Net income for the quarter was  $6.06 billion. The street had expected revenue of $20.5 billion, and earnings per share of $0.75 on a non-GAAP basis. GAAP estimates rested around the $0.68 mark.

So we’re expecting flat to middling earnings this time around, and that’s if we are being generous. Investors, however, aren’t fretting. Microsoft is coming off a string of big quarters that have kept its stock price near the critical $40 mark.

In fact, it appears that the investing class is more hyped on what new CEO Satya Nadella will say on the call than what the financial results will be; his predecessor didn’t deign to take part in such plebeian discourse. There is some reasonableness in this: Nadella has been CEO for a hot minute, so his efforts won’t have had much financial impact.

Therefore, his comments on strategy and the future of the company may be more important than a single trailing-three-month fiscal period. The numbers will still matter, however, and one matters to me more than others.

Yes, we’ll get into Windows OEM revenue and so forth, but what I am most curious about is Surface top line. Here’s where we ended up last quarter:

Microsoft reported Surface revenue of $893 million. In the final calendar period of 2013, the company introduced new Surface models, and saw shortages of the product. In the preceding quarter Microsoft had Surface top line of $400 million.

We therefore have to pick a new expectation figure for Surface in the quarter. Here’s where we landed right before Microsoft reported its calendar fourth quarter, fiscal second quarter earnings:

Screen Shot 2014-04-24 at 10.34.13 AM

So, Microsoft’s $893 million number, all but $900 million, landed on the nose of what we decided to call “solid.”

Put on your mathmagic hat. Microsoft Surface revenue went from $400 million in the quarter before new units were released, to $893 million in the quarter that included new hardware and Christmas.

So to see a massive bump was not unexpected. Now we’re back in a non-holiday, non-new unit quarter (LTE aside). So we expect a decline.

The question is how much? Here’s the mental rubric I’ll be applying: $550 million in Surface revenue for the period will be a decent figure. Anything between $600 million and $700 million will be quite good for the company, and if it can spike a sum north of $700 million, that’s a win.

Strap in for 1 p.m. Should be a good time.