Merrill Ups Microsoft to 'Buy'

Analyst Jason Maynard also added the software giant to its Focus One list, saying he sees potential earnings upside

Merrill upgraded Microsoft (MSFT ) to buy from neutral.

Merrill also added Microsoft its Focus One list. Analyst Jason Maynard says he's upgrading on the potential for earnings per share upside, a possible increase in Microsoft's dividend due to tax changes, and valuation disparity to its peer software group.

Maynard upped the $1.04 fiscal 2004 (June) earnings per share estimate to $1.09, vs. the current guidance of $1.04-$1.06, on the basis of expense management. He's encouraged by higher PC-unit numbers and positive feedback on new server products.

Maynard thinks his fiscal 2004 revenue estimate of $33.3 billion is achievable, and could show upside in the second half of the year. He views Microsoft shares as a lower risk vehicle to a moderately improving spending environment. He set a $30 target.

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