Microsoft Goes Soft on Guidance, Citing Surging Dollar

WAKE UP BABE. NEW SCAPEGOAT DROPPED.

Microsoft Corporation released a securities filing on June 2nd, which highlighted decreased sales and earnings guidance. Revised 4th quarter revenue guidance is $51.94-$52.74 Billion compared to original estimates of $52.40-$53.20 Billion. Operating income follows a similar trend with revised falling between $20.6-$21.3 Billion compared to original estimates of $20.90-$21.60 Billion. Microsoft opened the trading day down nearly 3%, and then made the most immaculate intra-day comeback to finish the day up 0.79%. I love this market.

Oddly enough, Microsoft is lowering their guidance primarily because of the strong resurgence in the U.S. Dollar. Although the U.S. economy ostensibly isn’t the greatest shape, we’re showing relative strength when compared to other countries around the world. The DXY (U.S. Dollar Index) measures the U.S. dollar against other currencies (namely the Euro, Japanese Yen, and British Pound). The DXY currently stands at its highest level since 2002.

A stronger U.S. Dollar is good for consumers, as it allows us to buy goods elsewhere across the world for “less.” On the opposite end, this means that U.S. companies get fewer dollars for their goods and services, as their products are more expensive to those across the world.

The surge of the dollar has come two-fold. For one, central bank’s rate raising environment entices investors into the U.S. dollar. Additionally, investors are also betting that the U.S. economy will fare better than its counterparts in Europe and Asia (wishful thinking, I suppose).

Microsoft isn’t the first company to issue revised grim guidance. Salesforce also claimed that a surging U.S. Dollar lowered their sales forecast for the remainder of the year. I’m sure Microsoft won’t be the last of U.S. companies that are struggling throughout the year to use the classic scapegoat of a red-hot U.S. dollar. Book it.