Goldman Sachs Rates Microsoft (MSFT) at Neutral

Goldman Sachs resumes coverage on Microsoft (NASDAQ: MSFT) with a Neutral rating and $30 price target.

While enterprise migration to Windows 7 and global PC shipment unit growth in FY2012 is a positive, ASP headwinds suggest Windows operating income may not post strong growth. With Windows accounting for about 40% of the comapny's operating income, this suggests limited EPS upside without lower expenses.

Goldman also notes that Microsoft Business Division faces tough yoy comps in FY2012 with the successful launch of Office 2010. In addition, the Street may be overly aggressive in its forecast for 10% revenue growth for the Entertainment and Devices Division in FY2012 due to the successful launch of Kinect. Goldman is estimating FY12 revenues of just $7.9 billion, versus the consensus of $9.7 billion.

While Microsoft is expected to continue to return cash to shareholders via share buybacks and dividends, the amount is limited due to only 16% of cash and short-term investments onshore.

Goldman says focus will move toward the Professional Developers Conference in September to gauge initial thoughts on Windows 8.

For more ratings news on Microsoft click here and for the rating history of Microsoft click here.

Shares of Microsoft closed at $26.63 yesterday.

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