Will Microsoft Earnings Move the Dow?

With hundreds of companies having reported quarterly results, we're now in the heart of earnings season. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, knee-jerk decision.

Let's turn to Microsoft (MSFT 1.76%). With its gain of 6% roughly in line with the overall performance of the Dow Jones Industrials (^DJI 1.51%) in 2012, Microsoft investors have been anxiously awaiting new products to accelerate the software giant's returns. Let's take an early look at what's been happening with Microsoft's over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on Microsoft

Source: Yahoo Finance.

Will Microsoft move the markets?
Analysts have stayed fairly stable in their estimates of Microsoft's earnings, lowering them just $0.03 per share in the past three months. Following a substantial miss in its previous quarter, Microsoft may have difficulty meeting estimates this time around, and the stock's roughly 7% drop since mid-October highlights the uncertainties the company is facing right now.

The key to Microsoft's fiscal second quarter was the success or failure of its key product launches. Earlier this month, the company said it had sold 60 million licenses for its new Windows 8 operating system, but many of those licenses came at discounted upgrade prices for Windows 7 machines. Meanwhile, weak PC sales show that Windows 8 didn't have the impact that computer-makers had hoped for, with Dell (DELL +0.00%) in particular seeing a 20% year-over-year plunge in worldwide shipments during the fourth quarter.

Meanwhile, Microsoft's Surface tablet hasn't produced the sales investors had hoped to see, either. One analyst now expects only 1 million Surface sales for the quarter -- half what he originally expected. With the long-anticipated Surface Pro not coming out until the current quarter, investors may have to wait until the next earnings release to see if Microsoft can finally gain traction in the tablet arena.

Before Microsoft reports, interested investors should be sure to read Intel's (INTC +2.68%) quarterly report. With its own take on the PC market, Intel disappointed investors with conservative guidance despite beating estimates. Given Microsoft's recent challenges, the company could end up disappointing on both fronts.

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