Microsoft shares slip on disappointing results
The drop shaved about $19 billion off Microsoft's market value and it was the world No. 1 software maker's biggest single-day fall since January 2009, when its quarterly results had also missed expectations.
Some analysts said they were concerned that Microsoft showed weakness across all its business units, and questioned whether the company's much-anticipated launch of a new Windows operating system could reignite growth later this year.
"While there are market indications that PCs and servers are beginning to stabilize, we do not anticipate a snapback in demand, despite the Windows 7 October launch, until 2010," said Barclays Capital analyst Israel Hernandez.
"In addition to cyclical exposures, we also believe that Microsoft faces longer-term challenges such as geographic mix issues, pricing pressures on Windows from netbooks, and heightened competitive pressures which are likely to continue to weigh on margins," he wrote in a note to clients.
Despite the sharp share drop, some investors were still optimistic about the longer term prospects of the Redmond, Washington-based company, whose operating systems power the vast majority of personal computers.
"As the economy stabilizes, there will be more money spent on IT and Microsoft will be a beneficiary," said Andy Rutlin, a Microsoft analyst for Thornburg Investment Management, which has built up its position in Microsoft in the past six months.
"The reason we own Microsoft is for the Windows 7 product upgrade cycle," said Rutlin, adding that Microsoft was hit by some people shying away from purchasing new PCs until the new operating system is released.
Rutlin doesn't plan on buying any more Microsoft because the stock is already among the top holdings in the Thornburg Core Growth Fund, but he suggested others "take an opportunity like today to increase positions in the shares."
WINDOWS ANNUAL SALES FALL
In its fiscal fourth quarter ended in June, Microsoft's revenue fell 17 percent to $13.1 billion, some $1 billion smaller than analysts' average estimate. It was also the first-ever decline in annual sales of Windows. [ID:nN23403957]
The stock, which had risen 70 percent in the past four months, fell as much as 10.76 percent on Friday before closing at $23.45, down 8.26 percent, on Nasdaq. It was the biggest drag on the Dow Jones industrial average .DJI and Nasdaq composite index .IXIC, which halted a 12-day rally and ended down 0.39 percent.
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