In research notes, Lehman analyst Michael Stanek cut his revenue target for fiscal year 2001 by approximately $640 million, down some 2 percent from $26.54 billion, or $1.91 a share, to $25.9 billion, or $1.88 per share.
Stanek also lowered his earning-per-share estimates for all fiscal 2001 quarters. For the second quarter, he now expects Microsoft to earn 49 cents per share, a penny less than his previous estimate. He trimmed his third-quarter earnings estimate to 46 cents, down from 48 cents per share, and his fourth-quarter target to 46 cents from 47 cents.
Microsoft faces the biggest hurdle in the third quarter, Stanek said, because it grew some 23 percent during the year-earlier period. A backlog in PC inventory will likely slow down sales of machines pre-loaded with the company's software, he said.
"Given the overwhelming anecdotal evidence that continues to flow from the enterprise and consumer PC sectors, we believe that our once conservative PC growth-rate assumptions are too aggressive," Stanek wrote in notes, adding that PC sales make up only 15 percent of Microsoft's revenue. "Our concern is less the consumer PC but rather, cautious statements about worldwide IT (information technology) spending in general made by (chief financial officer) John Connors last week."
On Thursday, Goldman Sachs analyst Rick Sherlund reduced his sales and earnings targets for Microsoft while maintaining a rating of "market outperform" on the stock. Microsoft shares dropped following the news.
But as IT spending rebounds, Stanek added, Microsoft should return to 20 percent revenue growth.
Meanwhile, ING Barings on Friday morning downgraded its rating on Microsoft's stock to "buy" from "strong buy."