Blodget dropped revenue expectations for the fourth quarter from $6.5 billion to $6.3 billion, and lowered earnings estimates by a penny from 43 cents per share.
Microsoft is expected to report results July 19. Wall Street analysts on average are predicting the company will report earnings of 42 cents a share, with expectations ranging from 41 cents per share to 46 cents per share.
Blodget also trimmed revenue and earnings estimates for the fiscal year.
The sluggish PC market was the primary rationale for the cuts, Blodget said, saying that global PC unit sales are the "No. 1 revenue and earnings driver for Microsoft." Blodget's fellow analyst at Merrill Lynch, Steve Fortuna, today cut his global PC unit growth estimate from a 2 percent decline to a 7 percent decline.
"Weakness in the demand for enterprise software--reflected in a variety of recent pre-announcements (e.g., Sybase, i2)--is also a factor," Blodget wrote.
Looking to Microsoft's next fiscal year, Blodget dropped revenue predictions from $29 billion to $28.7 billion, and earnings estimates from $1.92 per share to $1.90 per share.
On Tuesday, Lehman Brothers analyst Michael Stanek cautioned that things may not look good for Microsoft in the first quarter of the new fiscal year, since companies may hold off on purchases until Microsoft releases its new Office XP software in October.
But while the company should see some uptick in sales due to corporations replacing older PCs and upgrading their software, Office XP "is a wildcard," he wrote.
"Office upgrades are a discretionary IT expenditure that are vulnerable in times of IT budget cutbacks (i.e. today)," Blodget wrote. "Further, we believe that much of the impact of the Office XP launch will be offset by weak sales of business PCs."