Funky Friday: More than $32 billion in Microsoft stock value wiped out

Shares suffer biggest one-day percentage sell-off since 2000 as investors fret over weak demand for Microsoft's latest Windows operating system and Surface tablet.

When it came to Microsoft, it was "sell." Getty Images

The weekend can't start soon enough for Microsoft CEO Steve Ballmer, who watched as investors drove down the company's stock by more than 11 percent Friday after a disappointing earnings report raised questions about demand for the latest Windows operating system as well as the Surface tablet.

The stock finished at $31.40, off $4.04 for the day. The percentage decline -- which wiped out more than $32 billion in stockholder value -- was the biggest slide in Microsoft's stock since the year 2000. More than 245 million shares traded hands compared with the 90-day average trading volume of 50 million.

On Thursday afternoon, Microsoft announced its fiscal fourth-quarter earnings and the report again raised questions about the CEO's bigger strategy. On the surface -- no pun intended -- the company posted decent numbers. Microsoft's net income was $4.96 billion, compared with a $492 million loss during the year-ago quarter. Revenue rose 10 percent to $19.9 billion. Unfortunately for Microsoft, the earnings were about 9 cents shy of Wall Street expectations.

The report also triggered new worries as sales by the Windows division fell almost 6 percent from the year-earlier period. Microsoft also took a $900 million write-down related to unsold inventory of its Surface tablet. It also fed the flames about the CEO's ability to navigate the company successfully into the post-PC era.

Earlier in the day, Nomura Securities' Rick Sherlund, an analyst who has followed Microsoft since the 1980s, put out a note to clients that bluntly questions the chances for success of a recent corporate reorganization that Ballmer announced last week. That move calls for the elimination of the current five Microsoft business units along with merging all three Microsoft operating systems into a single division. Also, marketing and business strategy decisions will get centralized in cross-company groups. The hoped-for upshot will be a more agile and responsive tech company. But Sherlund took a dim view of the reshuffle after going through the latest numbers.

"The recent reorganization does not fix the tablet or smartphone problem," he said. "The devices opportunity just received a $900 million hardware write-off for Surface RT and investors may not even like the idea of wading deeper into this territory."

 

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