Microsoft stock hammered on lower sales forecast

After Microsoft announced Friday that its sales for the quarter would be 6

percent lower than expected, the company’s stock took a dive on Wall Street

Monday, falling $6.31 to $49.19, nearly 60 per cent below its 52-week high. Some

157 million Microsoft shares changed hands, the sixth most in one day in Wall

Street history.

Microsoft’s announcement was particularly shocking to many shareholders.

You to go back to March 1989 for the last time the software company had to issue

a warning that sales and earnings would not meet an earlier forecast.

"We see slowing global economic conditions, particularly in the

U.S.," said Microsoft Chief Financial Officer John Connors. The slowdown is

hurting PC sales and reducing corporate purchases of desktop software,

especially high-prices software suites such as Office. Connors said sales in its

second quarter ending December 31 will be $6.4 billion to $6.5 billion, less

than the $6.8 billion Wall Street forecast.

Expected profits of 46 cents a share compare to the 49-cent estimates.

Microsoft’s problems, said Connors, reflect a general economic slowdown,

particularly in the U.S. "We did not anticipate the rate of deceleration in

the world economy. It is hard to predict the slowdown's dimensions."

Connors also said revenue from the MSN online service subscriptions, despite an

intense new marketing push, was less than expected. And like all online portals,

MSN has seen advertising revenues dwindle, in part because so many dotcom

companies, which advertised heavily online, have gone out of business.

Connors said he is still optimistic about Microsoft’s 2001 results as the

company is planning to introduce a broad range of products in the next six

months. And PC sales will recover, he predicted, "The PC is far from dead.

It is the single most important asset for office workers today and into the

future."

The disappointing financial result may already have caused Microsoft to make

a major change in its sales management structure. In July, Senior Vice President

Joachim Kempin is stepping down as head of sales to computer makers to oversee

special projects. Kempin will be replaced by Richard Roy, general manager of

Microsoft's German subsidiary. Sales to computer makers accounted for almost 31

per cent of Microsoft's $23 billion in sales for fiscal 2000. In his new role,

Kempin will advise CEO Steve Ballmer on special projects.