Microsoft Cuts Forecasts Amid PC Slowdown

In a move that can be expected to be a blow to the gut for the Nasdaq Friday morning, Microsoft Corp. Thursday warned Wall Street that revenue and earnings for its second quarter, ending on Dec. 31, will be below expectations and the overall outlook for fiscal 2001 should be lowered by five percent.

The software juggernaut said revenue is expected to be in the range of $6.4 to $6.5 billion and diluted earnings per share should be 46 or 47 cents, off the street’s forecast of 49 cents per share. Microsoft said the revised expectations for both revenue and earnings per share represent a five to six percent reduction from previous guidance.

Still, the revision didn’t come as a complete surprise. Last week, Goldman Sachs analyst Rick Sherlund already trimmed his estimate for Microsoft causing investors to send the stock down 6 percent on Dec. 7.

In a statement issued late Thursday, the company also advised that fiscal 2001 revenue is expected to be in the range of $25.2 to $25.4 billion with diluted earnings per share in the range of $1.80 to $1.82, well off the Street’s expectations of $2.02.

“We believe, like many other technology companies, that the current weakness in worldwide economic conditions is resulting in a slowdown in PC sales, corporate IT spending, and consumer online services and advertising,” said John Connors, chief financial officer. “Accordingly, we are adjusting our revenue and earnings expectations for the current quarter, and for the balance of the fiscal year. However, while our short-term results will continue to be affected by the current economic environment, our long-term outlook on the information technology market and the PC industry remains positive. We have a lineup of new products and technologies that are receiving rave reviews from customers, and we continue to be very excited about the progress we are making across all our businesses.”

Actual results for the quarter and more details on the outlook for the fiscal year will be reported on Jan. 18.

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