As discussed previously many times, dividends will become more important. And look, Microsoft is increasing the dividend. Aivars Lode
We are revising our MSFT earnings model to reflect: i) MSFT’s guidance for the impact of the Office Tech Guarantee; ii) a dividend increase to $0.23 per share from $0.20 per share; and iii) Gartner’s latest PC unit shipment forecast. The net effect of these changes is relatively modest: for FY2013, revenue and GAAP EPS are now $80.5 billion and $2.94, compared to $80.7 billion and $2.96 previously; for FY2014, revenue and GAAP EPS are now $86.0 billion and $3.24, compared to $86.8 billion and $3.28 previously. We continue to rate shares of MSFT Neutral.
- Office tech guarantee. Management estimates $100–140M of Office revenue will be deferred in the SepQ; we estimate a further ~$500M will be deferred in the DecQ. These amounts will be recognized as revenue upon GA of Office 2013, which we assume happens on January 1, 2013.
- Dividend increase. As previously announced, MSFT’s dividend per share will increase to $0.23 from $0.20 starting in the DecQ. This amounts to about $250M of additional quarterly dividend payments.
- Gartner’s updated PC unit shipment forecast. Gartner’s latest forecast calls for CY12 and CY13 y/yunit growth of 0.2% and 7.3%, compared to 2.4% and 10.1%, previously.
- Model changes. Our SepQ revenue and GAAP EPS are now $16.3B and $0.51 vs. $17.0B and $0.54 previously; our FY2013 revenue and GAAP EPS are now $80.5B and $2.94 vs. $80.7B and $2.96 previously; and our FY2014 revenue and GAAP EPS are now $86.0B and $3.24 vs. $86.8B and $3.28 previously.
- We continue to rate shares of MSFT Neutral. We are establishing a December 2013 price target of $30 based on our DCF.