This story was written by Keith Dawson for the Industry Standard's Media Grok email newsletter. It is archived here for informational purposes only because The Standard's site is no more. This material is Copyright 1999-2001 by Standard Media.

Microsoft Lowers Expectations
Dec 15 2000 12:00 AM PST

Redmond issues a rare warning, and it insists there's still life in the old PC.

This rarely happens to the king of the hill - it's only the second time in Microsoft (MSFT)'s 14-year history as a public company. The company downgraded its earnings estimates after the market closed yesterday, and most outlets covered at least the bare facts. Microsoft now expects earnings of 46 or 47 cents a share, below the recently lowered Wall Street consensus estimate of 49 cents. Microsoft CFO John Connors attributed the sudden bad news to "a slowdown in PC sales, corporate IT spending, and consumer online services and advertising."

Connors, who broke the news yesterday in a conference call with analysts, was quoted all over the place. CNBC and the San Jose Mercury News captured Connors's somewhat defensive sound bite: "The PC is far from dead." MSNBC's story demonstrated that this defensiveness may be appropriate. The outlet included excerpts from an interview the CNBC TV network aired with Larry Ellison, in which the Oracle (ORCL) chairman argued, as he is wont to do, that the PC generation is over. (Oddly, CNBC didn't mention its own interview.)

The Wall Street Journal's Rebecca Buckman talked to more industry analysts (three) and picked up on some nuances not widely reported elsewhere, for example S.G. Cowen analyst Drew Brosseau's view that progress in upgrading MS Office customers to Office 2000 "doesn't appear to be materializing."

CNBC headlined their piece "Microsoft Warning No Surprise" and quoted Branch Cabell analyst Frederic Dickson, who maintains a "strong buy" recommendation on the stock. But CNBC writers Frances Hong and Hal Plotkin concluded, "Microsoft shareholders probably don't have much to look forward to when it comes to sales of new PCs." - Keith Dawson

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