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MS estimates up

Microsoft flies high with Wall Street analysts while SGI and Compaq lose altitude.

Microsoft gets upped
Microsoft (MSFT) got at least three positive earnings adjustments following an 80 percent jump in quarterly profits. (See related story)

The company's stock gained 9-1/2 to close at 107-5/8 in trading today from yesterday's close of 98-1/8.

Goldman Sachs analyst Richard Sherlund upped his fiscal year 1997 estimate to $2.60 from $2.35 a share and fiscal year 1998 to $3.10 from $2.75 a share.

Hambrecht & Quist analyst Christopher Galvin raised his fiscal 1997 earnings estimates to $2.64 a share from $2.33 and fiscal 1998 estimates to $3.26 a share from $2.70.

In a statement, Galvin called Microsoft's third-quarter results "outstanding" and maintains a "buy" rating on the stock.

Stamford, Connecticut-based SoundView Financial analyst Russ Crabs raised his fiscal 1997 earnings estimate to $2.63 per share from $2.39 and raised fiscal 1998 estimates to $3.29 per share from $2.90. Crabs, however, left his rating unchanged.

SGI gets downed
Silicon Graphics (SGI) was downgraded by at least three firms after missing analysts' expectations by a wide margin of 21 cents a share. (See related story)

The company's stock tumbled as much as 25 percent to close at 12-7/8 from yesterday's close of 17.

Salomon Brothers analyst John Jones cut the workstations maker to a "hold" from a "buy" stock. The firm also cut its fourth-quarter earnings per share estimate to 30 cents and its 1997 and 1998 earnings estimate to 47 cents and $1.10 a share, respectively, from $1.04 and $1.98 a share.

J.P. Morgan Securities analyst Daniel Kunstler cut his rating on SGI to "market perform" from "buy." Goldman Sachs also removed SGI from its "recommended list" and rates the shares at "market perform."

Compaq gets cut
SoundView Financial analyst Mark Specker downgraded Compaq Computer (CPQ) to "short-term hold" from "buy" despite reporting a 66 percent jump in earnings this week. (See related story)

The company's stock dropped 3-3/4 in trading today to close at 72, down from yesterday's close of 75-3/4.

"We think Compaq's transition to a bill-to-order forecast is going to give them an inventory issue," said Specker. He explained that traditionally, the channel determines how much inventory it needs, but Compaq wants to move from that system to one in which they ship once the orders are already made, and that could have a big impact on earnings.

Specker added that usually once the products go into the channel, that is considered revenue, but since Compaq wants to delay shipping, this quarter's earnings will take a hit. "With a loss of $300 million off the top line, that makes earnings go down a lot. It just doesn't look like the second quarter can do a lot for the stock."

The analyst cut his second-quarter revenue expectations by $300 million and his third-quarter expectations by $200 million, but raised his fourth quarter expectations by $200 million because he expects strong unit growth. Specker said that a lot can happen between now and then.

Reuters contributed to this report.