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Microsoft Shares Drop on Warning |
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December 17, 2000
SEATTLE (AP) — Shares of Microsoft fell nearly 9 percent in early trading Friday following a warning by the software giant that its second-quarter revenue and profits will be 5 percent to 6 percent lower than previous estimates due to a worldwide slowdown in computer sales. Microsoft became the latest technology company to issue a pessimistic earnings forecast for this reason, joining a group that includes computer makers Gateway Inc., Compaq Computer Corp. and semiconductor giant Intel Corp. Revenue for the quarter ended Dec. 31 is now expected to be $6.4 billion to $6.5 billion, with earnings per share of 46 cents or 47 cents, Microsoft said late Thursday. Analysts surveyed by First Call/Thomson Financial were expecting 49 cents per share. Investors responded by sending Microsoft stock down $4.75 to $50.75 in early trading on the Nasdaq Stock Market. Microsoft, one of the 30 components of the Dow Jones industrial average, is now more than 55 percent off its 52-week high of $119.94. For the fiscal year ending in June, Microsoft now expects revenues of $25.2 billion to $25.4 billion, about 5 percent lower than previously expected. Earnings per share will be about $1.80 to $1.82; analysts were expecting $1.91. ``It's always important to note that it's not like the business is shrinking,'' said industry analyst Dwight Davis with Summit Strategies in Kirkland. ``It's just that the growth rates aren't as high as they had hoped.'' He noted that Microsoft ``has a history of lowballing their estimates and then coming out and doing better than expectations.'' But he said it was relatively rare for the software company to readjust downward midway through a quarter. In a conference call with analysts, John Connors, Microsoft's chief financial officer, said the reduced expectations were more heavily weighted to desktop applications than platforms. He was referring to software such as Office, the company's flagship business software, which — like Windows — is often sold pre-installed in PCs. A fairly good percentage of PCs sold at retail do end up in businesses, Connors noted — especially small to mid-size business. ``The PC is far from dead,'' Connors said, adding that the industry ``shouldn't expect the kind of growth we had when it was growing from a smaller base.'' The PC industry will ship 125 million units this year, he said. Over the next six to 18 months, he said, Microsoft will be shipping ``two very compelling technologies,'' Office10 and Whistler, new Windows 2000 products for business PCs. Microsoft will report its actual results for the quarter on Jan. 18. On the Net: http://www.microsoft.com |