Microsoft Misses, Warns

Microsoft capped a tumultuous day in the stock market with a rare earnings miss and warning.

During the day, an apparently accidental plane crash into a Milan building roiled a market that was already down on lowered sales estimates by Nokia and weak manufacturing earnings. Despite all that, the market fought back to finish down only slightly on the day.

The ISDEX http://www.wsrn.com/apps/ISDEX/ lost 2 to 147, and the Nasdaq gave back 8 to 1802. The S&P 500 declined 1 to 1124, and the Dow slipped 15 to 10,205. Volume was unchanged at 1.37 billion shares on the NYSE, and slipped to 1.86 billion on the Nasdaq. Decliners led by a few issues on the NYSE, and by 18 to 16 on the Nasdaq.

After the close, Microsoft (NASDAQ:MSFT) fell 2 points after missing earnings and revenue estimates, guiding second-quarter revenue estimates 10% lower, and lowering 2003 guidance too. The company was widely expected to lower guidance, and one news service reported that the company may have met earnings estimates after charges and gains are accounted for. On the plus side, Microsoft said PC demand may have bottomed, although IT spending remains weak. 53.50 is critical support on the stock (see chart in market commentary below).

Also after hours, eBay (NASDAQ:EBAY) fell after beating earnings estimates and matching revenue estimates. Emulex (NASDAQ:EMLX), NetIQ (NASDAQ:NTIQ), Scientific Atlanta (NYSE:SFA), UT Starcom (NASDAQ:UTSI), Compaq (NYSE:CPQ), and Advanced Fibre (NASDAQ:AFCI) beat estimates.

Sun (NASDAQ:SUNW), Rational (NASDAQ:RATL) and PMC-Sierra Rational (NASDAQ:PMCS) beat earnings estimates but missed on revenues. Gateway (NYSE:GTW) and Nortel (NYSE:NT) met estimates. SonicWall (NASDAQ:SNWL) missed.

During the day, Nokia (NYSE:NOK) fell 12% after lowing sales estimates.

But IBM (NYSE:IBM) rose 5% after meeting lowered estimates and issuing a more optimistic outlook, and EMC (NYSE:EMC) gained 6% after beating estimates.

KLA Tencor (NASDAQ:KLAC) lost 4% after raising guidance, but not as much as analysts had hoped.

AMD (NYSE:AMD), Apple (NASDAQ:AAPL), PayPal (NASDAQ:PYPL), Lam Research (NASDAQ:LRCX), Digital Lightwave (NASDAQ:DIGL), Broadcom (NASDAQ:BRCM), and SanDisk (NASDAQ:SNDK) fell on their earnings.

Siebel (NASDAQ:SEBL), Inktomi (NASDAQ:INKT), Extreme (NASDAQ:EXTR) and Mercury Computer (NASDAQ:MRCY) rose on their reports, and E*Trade (NYSE:ET) was unchanged.

Some technical comments on the market: Note: To see the charts in the text email newsletter, click on the internetstockreport.com story link at the top of the newsletter.

Microsoft (first chart) must hold the 53.50 level tomorrow or it will break an uptrend going back to December 2000. The Dow (second chart) remains mired in a downtrend unless it can break above 10,275 tomorrow. 9950 looks like very good support if it gets that low. For the S&P (third chart), 1115 is critical support, and 1132-1134 is very tough resistance. For the Nasdaq (fourth chart), 1778-1790 is important support, although the index could go as low as 1757-1770. 1816-1820 is first resistance, and 1850-1860 is tough resistance.

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