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April 11, 2013 at 9:39 AM
Veteran analyst Sherlund downgrades Microsoft in wake of steep PC shipment declines
Veteran Microsoft analyst Rick Sherlund, of financial services firm Nomura, has downgraded Microsoft stock from “buy” to “neutral.”
He did so following reports yesterday from research firms IDC and Gartner that showed steep declines in PC shipments last quarter — far steeper than was forecast.
IDC had said wordwide PC shipments plunged 13.9 percent compared to the same quarter last year — the steepest year-over-year quarterly decline since IDC began tracking the PC market quarterly in 1994. It placed much of the blame on Windows 8. Gartner, meanwhile, had said worldwide PC shipments dropped 11.2 percent from last year to the lowest level since the second quarter of 2009.
Nomura’s Sherlund wrote in his note to investors this morning:
The combination of Windows 8′s sluggish adoption and the absence of compelling new hardware have been disappointing, with no relief likely until later this year when Intel’s Haswell new notebook processor extends Ultrabook battery life to 10 hours and prices fall to an expected $600 level.
He included a bad news-good news analysis of what might come to pass later this year for Microsoft, issuing a rather dire outlook for Office’s — the company’s cash cow — reach among consumers but saying Office would retain its traditional hold among business users. Wrote Sherlund:
We believe half of the customers in the consumer market do not need Office and are unlikely to remain with Microsoft for notebooks or tablets, while the other half likely work in an office setting and continue to produce higher-value content in Office and could be receptive to a new generation of thin, light weight, touch-based notebooks offering instant on, 10 hours of battery life and at a price approaching $600 by year- end. While it is difficult to assess the pace of underlying PC unit growth in the second half and likely upgrade demand, we expect some directional improvement that could benefit the stock.
Microsoft shares, which had been up earlier this week agove $30 — possibly as a reaction to the news that the company along with 16 others had brought antitrust complaints against Google’s Android before the European Union — was down again today. The shares are trading this morning at $28.78, down $1.50.
At least two other analysts also downgraded their ratings on Microsoft shares, according to Bloomberg News. Heather Bellini at Goldman Sach downgraded Microsoft from “neutral” to “sell” while Stephen Turner at Hilliard Lyons downgraded it from “buy” to “neutral.”