Why Microsoft Will Move the Dow Tomorrow

This earnings season, investors in the Dow Jones Industrials (DJINDICES: ^DJI  ) have dealt with a number of surprises, both positive and negative. As the season moves forward, we're getting second and third looks at certain industries, and investors today will closely study Microsoft (NASDAQ: MSFT  ) and its earnings to see if they confirm what we've already seen from Dow tech peers IBM (NYSE: IBM  ) and Intel (NASDAQ: INTC  ) . With Microsoft's share price having climbed so high, a disappointment could be devastating to the stock.

Source: Wikimedia Commons.

Microsoft will reports its results after the end of regular trading this afternoon, with the release usually made available to investors shortly after the market closes. The tech giant has a conference call scheduled to begin at 5:30 p.m. EDT.

Interestingly, investors have mixed expectations for Microsoft, with revenue seen soaring even though earnings per share will likely fall from the year-ago level. That's the opposite of what has been seen from tech companies such as IBM and Intel, which have focused on making greater profits from reduced revenue as they shift away from lower-margin niches toward more lucrative high-margin business. Yet in the long run, Microsoft has the same strategic goals as its peers, as it emphasizes making the most of the mobile revolution and ensuring that its lucrative software franchises remain relevant in a changing tech world.

Earnings reports from Intel and IBM have shown how important it has been for tech companies to ensure that their enterprise customers remain happy. Intel saw a surprising lift in PC sales in the most recent quarter, and most of that uptick came from enterprise customers choosing to upgrade their PCs in order to address Microsoft's end of technical support for the Windows XP operating system. Moreover, as technological advances in other areas have taken place, users need better hardware to support those changes, and Microsoft hopes to tap into that demand by providing necessary software to help businesses make best use of their higher-quality hardware.

Source: Microsoft.

At the same time, investors have punished tech companies that haven't figured out exactly which strategic direction they want to pursue. Microsoft is trying to balance many different efforts, including hardware like its Surface Pro 3 tablet/laptop hybrid and a variety of smartphones developed as part of the acquisition of Nokia's handset business. The company's move toward cloud-computing initiatives such as its Office 365 software has received a welcome reception from enterprise and consumer customers alike, and the resulting subscription revenue is exactly the sort of recurring and reliable cash flow that investors want to see. Yet CEO Satya Nadella faces the challenge of ensuring Microsoft doesn't get overloaded trying to boost all of its businesses' prospects at the same time.

Microsoft will move the Dow tomorrow, because its results not only project where the company will go but also whether old-line tech companies in general can adapt and compete in a rapidly changing environment. With Microsoft stock having already anticipated improvement in its underlying business, however, anything short of full success could send the Dow Jones Industrials downward on Wednesday.

Warren Buffett: This new technology is a "real threat"
At his recent annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains behind" the technology.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3038073, ~/Articles/ArticleHandler.aspx, 9/4/2015 8:35:08 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

Today's Market

updated 11 hours ago Sponsored by:
DOW 16,374.76 23.38 0.14%
S&P 500 1,951.13 2.27 0.12%
NASD 4,733.50 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/3/2015 4:35 PM
^DJI $16374.76 Up +23.38 +0.14%
IBM $146.78 Down +0.00 +0.00%
International Busi… CAPS Rating: ****
INTC $29.08 Down +0.00 +0.00%
Intel CAPS Rating: ****
MSFT $43.50 Down +0.00 +0.00%
Microsoft CAPS Rating: ***