Microsoft(s msft) stock hit a pretty healthy high of $42.47 Tuesday morning, fueled by a positive research note and continued talk that the company will cut a significant number jobs — with the layoffs probably coming this week.
In a note, Nomura Securities analyst Rick Sherlund wrote that he expects Microsoft CEO Satya Nadella to make “bold moves and organizational changes” and upped his target per share price to $50, from $45, for the year.
Sherlund also expects a “substantial ($1 billion plus) charge to mitigate the Nokia acquisition risk” as part of a strategic redirection. It’s moving away from its focus on devices and services strategy and focusing instead on new productivity applications and services. Recently, Nadella penned a memo to the troops which hinted at big changes to come. On the device front, Microsoft announced a response to low-cost Google Chromebooks at its partner conference on Monday.
Late last month, Gigaom reported that significant layoffs, many related to the Nokia acquisition, were on the way. Bloomberg had a similar report this week. Microsoft completed its $7.17 billion acquisition of Nokia in April and took on 25,000 new employees as a result. That acqusition was seen as a pet project of former CEO Steve Ballmer. Nadella, reportedly, was not a fan.
A couple of things are clear: For all its reported woes — being late to cloud, missing mobile — Microsoft remains a profitable company but one that needs to change as it confronts mega-rivals Google(s goog) (in cloud, in devices and in productivity applications as well as search) as well as public cloud leader Amazon Web Services(s amzn) . Hence, it’s clear to me that Microsoft Azure is the core of the new Microsoft, replacing Windows. Office — which is now moving cross platform — remains a money maker so look for it and its progeny to move to center stage as well.
Microsoft’s fourth quarter earnings call is slated for July 22 and it makes sense for the company to get this news out in advance of that.
Note: This story was updated at 1:08 p.m. PST to correct the reference to Rick Sherlund’s revised estimate for Microsoft. The $50 figure, as an astute reader pointed out, referred to Sherlund’s new target share price for Microsoft, not (duh) earnings per share.