Morgan Stanley Expects Solid FQ4 for Microsoft Corporation

In a report published Wednesday, Morgan Stanley analyst Keith Weiss reiterated an Equal-Weight rating on

. In the report, Morgan Stanley noted, “The elevated execution risk around restructuring, new business models and large acquisitions now balances the potential reward of several potential catalysts, including; 1) improving PC unit growth, 2) outperformance in the commercial licensing and devices divisions, 3) increasing exposure of the Cloud businesses and 4) increasing dividend or share buyback. Windows 8 gives MSFT an improved story on tablets, a new leg of rev. growth and downstream opps. for synergy with phones. Increasing the vertical integration of Microsoft software /services with Nokia hardware and better focusing Win Phone marketing likely represents the best strategy for long-term success in the smartphone business. However, the NOK transaction increases the risk profile and lowers EPS expectations in the near-term. Microsoft currently trades at 14x CY14e EPS vs. the S&P at 15.5x — and has an attractive dividend yield at ~3.3%, suggesting limited downside. However, with the added complexity of the NOK deal, we see less room for a new CEO to enact major strategic changes, which may limit further sentiment improvement.” Microsoft Corporation closed on Tuesday at $42.45.