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Analyst cuts MSFT forecast
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April 12, 2000: 6:06 p.m. ET
Software maker's stock drops after influential analyst lowers sales forecast
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NEW YORK (CNNfn) - An influential Wall Street analyst lowered his forecast for Microsoft Corp.'s sales for the latest quarter Wednesday, sending the software maker's stock lower and dealing another blow to the highly volatile technology sector.
Microsoft shares fell 4-1/2, or 5.4 percent, to 79-3/8, driving down even further an already-battered Nasdaq composite, which is studded with tech heavyweights. The Nasdaq ended the day down 286.27 at 3,769.63, a 7 percent slide on the day.
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Goldman Sachs analyst Rick Sherlund, citing sluggish demand for personal computers, cut his forecast for Microsoft's sales to $5.75 billion for the company's fiscal third quarter ended in March, from $5.95 billion.
In a research report, he said March revenue recovered somewhat, but the first part of the quarter was particularly sluggish. "This is a further negative for sentiment in a poor tech market," he wrote.
(Click here for the full report)
"We hoped that March would be back on track and strong enough to bail out the quarter, but it doesn't look like it got there fast enough to really allow this company to climb out of the hole they dug themselves in for January and February," Sherlund said in an interview on CNNfn Wednesday. (398WAV) (398AIF)
Sherlund said the reduction could cut Microsoft's quarterly earnings by about 2 cents a share, though he said investment gains in the quarter should offset the loss.
Microsoft is expected to post a profit of 41 cents a share in the latest quarter, according to First Call, which tracks forecasts by Wall Street analysts.
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Microsoft shares are well off a 52-week high of 119-15/16 amid the government's antitrust lawsuit against the company and weakness in technology shares.
Microsoft (MSFT: Research, Estimates) shares remain on Goldman Sachs' "recommended" list. Sherlund said Microsoft should perform better later this year, as the company's antitrust case with the government likely will move to the appeal stage and a new version of its Windows 98 operating system and other new products are expected to go on the market this summer.
"I think we're going to see stronger momentum, better sentiment in the second half of the year," he said. "The antitrust case will be a back-burner issue by then."
Meanwhile, sources told CNNfn Wednesday that Justice Department attorneys and 19 attorneys general are leaning against demanding a break-up of Microsoft in the penalty phase of their antitrust case against the company.
Instead, it is likely that they will seek changes in the company's business practices, a prosecution source told CNNfn. A final decicison on which path they will follow is expected in about a week.
Earlier this month, Jackson found Microsoft guilty of breaking U.S. antitrust law by abusing its monopoly in personal computer operating systems. The case has now moved to the remedies phase, in which the judge will decide what action to take against the company. 
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