Merrill Raises Microsoft Estimates

Analyst Jason Maynard also thinks the software giant's shares are undervalued

Merrill Lynch raised its estimates and reiterated the buy rating on Microsoft (MSFT ).

Analyst Jason Maynard says the $9.2 billion in total revenue is well above his $8.6 billion estimate. The 34 cents operating earnings per share beat his 29 cents estimate. Maynard says revenue increased 17% annually, driven by strong sales of Windows XP, Office 2003, the server business, and better-than-expected Xbox sales.

Maynard notes Microsoft's unearned revenue balance declined by $326 million, which is better than his forecast for a decline of $450 million to $500 million. Due to outperformance in the third quarter, he raised the $35.8 billion fiscal 2004 (June) estimate to $36.5 billion, and upped the $1.20 earnings per share estimate to $1.26. He raised the $37.5 billion fiscal 2005 revenue estimate to $38.2 billion, and upped the $1.27 earnings per share estimate to $1.33.

He continues to believe Microsoft shares are undervalued, and he has a $30 price objective.

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