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Microsoft stock retreats
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February 11, 2000: 5:43 p.m. ET
GartnerGroup reports, Dell comments combine to trigger share slump
By Staff Writer David Kleinbard
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NEW YORK (CNNfn) - Shares of software giant Microsoft Corp. dipped today in response to investors' concerns that companies may be slow to adopt the company's new Windows 2000 operating system.
The concerns about Windows 2000 appear to have been triggered by several reports issued by the GartnerGroup, a technology research firm based in Stamford, Conn., and comments made on Thursday evening by Dell Computer CEO Michael Dell.
Microsoft is scheduled to release its long-awaited Windows 2000 operating system on February 17. The operating system is aimed at business users, rather than consumers, and is intended to supplant Windows NT, which is commonly used to run computer servers.
Microsoft shares were down 6-9/16 to 99-7/16 in late afternoon trading. Most other technology stocks were down also, with the technology-laden Nasdaq index down about 112 points in late afternoon trading.
The GartnerGroup reports, issued over the past three months, forecast that over the next two years 50 percent of medium-sized and large companies will encounter compatibility problems between Windows 2000 and business applications or network infrastructure. That number will drop to 25 percent by 2003, the report forecasts.
"Windows 2000 is ready for many enterprises, but many enterprises aren't ready for Windows 2000, said Michael Gartenberg, a GartnerGroup vice president who wrote the reports.
Gartenberg said today that the reports repeat statements GartnerGroup has made for several months, but that compatibility issues have been gaining more press attention now.
"We have been talking about compatibility issues with Windows 2000 for 18 months, but we believe that companies can overcome those problems if they plan accordingly," Gartenberg said. "Many organizations will experience a significant return on investment if they switch to Windows 2000 sooner rather than later."
The GartnerGroup forecasts that by year-end 2000, between 15 percent and 20 percent of the 1999 commercial installed base of Windows desktops and laptops will be upgraded or refreshed with Windows 2000 Professional. That will rise to between 40 percent and 45 percent by the end of 2001. By the end of this year, between 3 percent and 6 percent of the 1999 commercial installed base of Windows NT Server will be upgraded or refreshed with Windows 2000, rising to between 45 percent and 50 percent by the end of 2001, the report says.
GartnerGroup predicted that many companies will exceed their budgets for upgrading to Windows 2000. Through 2002, 80 percent of all Windows 2000 Professional installations by companies with more than 500 desktops will exceed their budgets for time or money by at least 25 percent, primarily because of lack of proper planning, the report said.
Comments made by Dell's CEO during his company's earnings conference call Thursday also placed selling pressure on Microsoft stock.
Michael Dell told analysts that companies are rapidly adopting the Linux operating system, which competes with Windows. He also said that he "doesn't see a massive rush to install Windows 2000 immediately." Linux is an operating system that can be downloaded for free from the Internet. Many "dot.com" companies run their servers using Linux because it's inexpensive to install and is very stable.
Securities analysts said that neither the GartnerGroup report nor Michael Dell's comments broke new ground.
"We have said for some time that Windows 2000 will have a slow ramp because companies take time to test and deploy new operating systems," said Andrew Roskill, a software analyst at Warburg Dillon Read in New York. "Windows 2000 is basically a second half of 2000 story."
GartnerGroup's Gartenberg said that having between 15 percent and 20 percent of commercial desktops upgrading to Windows 2000 by the end of this year could be considered a success for Microsoft, since many companies will wait until bugs or compatibility problems have been discovered before installing the new operating system.
In addition, the companies writing software applications for Windows 2000 have had access to the final version of the operating system's code for only two months, Gartenberg said. 
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Microsoft Corp.
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