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RealTime IT News

Microsoft 'News' A Non-Event

It's funny what the stock market will rally on these days.

Two weeks ago, it was Cisco's reaffirmation of two-week old earnings guidance that sent stocks soaring in a one-day rally. Yesterday it was Microsoft's reaffirmation of its earnings guidance ... for June 2002.

The presentation by Microsoft CFO John Connors was such a non-event that the company itself later put out a statement saying that Connors was just repeating what the company had said in July. But coming in an oversold market that was looking for a reason to rally, traders jumped on the Microsoft news to send stocks higher.

But we're wondering if there wasn't some news buried in Connors' presentation to the SG Cowen technology conference. According to a Dow Jones summary of the presentation, Connors said the company expects this quarter to be "soft," with the launch of Windows XP in late October helping the December quarter. In other words, he did not reaffirm guidance for the current quarter, and in fact suggested that this quarter has been a weak one.

Given that the company has already warned for this quarter, it will be interesting to see if analyst estimates come down further before the company reports next month. The current consensus estimate, according to Zacks, is 40 cents.

Meanwhile, that Microsoft chart still looks like the company will eventually retest the December low around $40 (see chart below). That call might have sounded crazy when the stock was at $67, but it's looking like more of a possibility in the mid-50s.

And Cisco Systems yesterday broke down around $15.70, making our $13 target seem likely at this point (see chart below). In fact, the stock could hit $11 based on that breakdown.

The good news is that the market is expecting negative news out of Intel after the close tonight, giving the company some room for a positive surprise.

And watch the NAPM services report at 10 a.m. today for a read on the health of the all-important services sector.