Saturday, April 29, 2006

Microsoft Shares Tumble on Spending Concerns

Shares of Microsoft Corp. on Friday tumbled 11 percent, their biggest drop in more than five years, after the software giant said greater investment to take on rivals would hurt future earnings.

The move shocked Wall Street, which had been betting on growth from the company's biggest product releases in years.

"This effectively takes the wind out of the sails of investor sentiment at a time when investors were beginning to warm up to the prospects for accelerating earnings momentum," wrote Goldman Sachs analyst Rick Sherlund in a research note.

Microsoft on Thursday forecast earnings per share of $1.36 to $1.41 for the 2007 fiscal year, starting July 1, compared with an average analysts' forecast of $1.53 per share, according to Reuters Estimates.

While it did not disclose specific plans, Microsoft said it would increase spending on its software services business, a course of action that would take a bite out of fiscal year earnings.

Microsoft has already delayed delivery of its much-anticipated Vista operating system and Office 2007 business-software suite until January.

Shares in Microsoft fell $3.12 to $24.13 in their biggest single-day drop since December 15, 2000.

News source: eWEEK

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