Analysts Disagree On Microsoft Earnings Benefit From Job Cuts

The size of

near-term earnings benefit from its pending work force reduction of 14 percent became a matter for disagreement among analysts on Thursday. Microsoft shares gained nearly four percent Thursday before dropping back, closing up one percent at $44.53. Stifel analyst Brad Reback figures the job cuts will result in added 2016 profits $450 million, or just $0.05 cents a share. But Reback expects the head count will ultimately fall by only 15,000, rather than the 18,000 laid out by Microsoft Chief Executive Satya Nadella Thursday. Reback rates Microsoft at Hold, saying its shares are fully valued. A widely different take comes from Evercore analyst Kirk Matern, who says the action will add $0.30 cents a share to 2016 earnings, "even with fairly conservative assumptions of cost per employee." And earlier this week, Morgan Stanley's Keith Weiss figured that by cutting only 10 percent of its work force, Microsoft could add $0.20 cents a share to earnings. Microsoft is expected to earn $2.86 a share in 2015, the latest year for which consensus views are generally published.