Will Microsoft Corp. (NASDAQ:MSFT) announce more layoffs on Thursday, when it is expected to report fiscal third-quarter earnings after the stock market closes?
"We expect results to be below our revenue/EPS outlook, reflecting continued weakness in enterprise spending," writes Sid Parakh, an analyst at Seattle's McAdams Wright Ragen firm in a research note about Thursday's expected announcement. "As a likely consequence of tougher business conditions, our checks indicate that Microsoft may embark on another round of restructuring in the near future."
At its last earnings call in January, Microsoft announced widespread layoffs for the first time in its 34-year history. At that time, the software giant surprised observers by announcing before the stock market opened and by refusing to provide EPS guidance for the balance of the fiscal year.
"Over the last week, we have heard from multiple sources that Microsoft may engage in
additional restructuring activities in the near-to-mid term," writes Parakh. "While our checks seem to unanimously imply further headcount cuts, there is uncertainty around whether such cuts will be a moderate revision to plans announced in January or is a sizable addition to prior headcount reduction plans."
Analysts surveyed by FactSet Research expect the company to report earnings of 39 cents per share, compared with 47 cents per share for the same quarter a year ago.
Another issue Microsoft investors are tracking closely is the status of talks between CEO Steve Ballmer and Yahoo! Inc. (NASDAQ:YHOOO) CEO Carol Bartz, who are reported to be discussing a partnership.
As Jefferies & Co. Internet analyst Youssef Squali commented after Yahoo!'s earnings call earlier this week, "While management skirted the Microsoft issue, we remain convinced that a search deal, perhaps a swap deal between Yahoo/Microsoft, would be a win/win for both companies as it would make Yahoo! the undisputed leader in Display and MSFT a viable #2 in Search. -- Mary Kathleen Flynn
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