Microsoft (MSFT) Adjusts Investor Expectation Down

Wall St. is estimating that Microsoft (MSFT) will make $.40 a share in the current quarter and $1.77 for its fiscal year which ends in June. The company’s CEO is sending a signal that the firm won’t make those numbers.

According to Reuters, in an interview Steve Ballmer said “Microsoft revenues will be impacted by the economic slowdown.” While some of the slowing sales may be due to a disappointing reception for the company’s new Vista OS, Ballmer’s comments seem to go well beyond that.

Looking at the company’s major operating divisions, sales of its Xbox game console could be taking a beating as demand for consumer electronics drop. Its MSN internet unit is likely being hurt by falling advertising demand. The question is to what extent the Microsoft operating system and business software divisions are being harmed. They are the largest parts of the company and by far the most profitable.

Comments from PC companies including Acer and Dell (DELL) and the chip firms like Intel (INTC) which provide their processors, say that sales of computers are dropping sharply compared to last year. That could do a lot of damage to Vista sales.  SAP (SAP), the world’s second largest enterprise software company,  and Oracle (ORCL) issued weak forecasts and cut staff.

Microsoft’s next quarter may be well below even the lowest analyst expectations.

Douglas A. McIntyre