Microsoft shares hit by biggest sell-off since 2009

Fri Jul 19, 2013 5:19pm EDT
 
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(Reuters) - Microsoft Corp shares fell more than 11 percent on Friday, their biggest plunge in more than four years, a day after the software company posted dismal quarterly results due to weak demand for its latest Windows system and poor sales of its Surface tablet.

The stock's selloff, from five-year highs, is the biggest in percentage terms since January 2009, when the world's largest software company cut 5,000 jobs during the recession. At one point in the day, losses exceeded 12 percent, making it the biggest fall since the Internet stock bubble burst in 2000.

About $34 billion was wiped off Microsoft's market value on Friday, exceeding the size of rival Yahoo Inc.

Microsoft's earnings were wrecked by a $900 million writedown on the value of unsold Surface tablets after it cut prices in a bid to excite buyers.

The poor results shocked Wall Street, which had believed the company's strength with business customers would help it ride out a downturn in consumer PC sales. The results provoked fresh skepticism of Chief Executive Steve Ballmer's new plan to reshape the company around devices and services, unveiled last week.

"The recent reorganization does not fix the tablet or smartphone problem," Nomura analyst Rick Sherlund said in a note to clients on Friday. "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."

Sherlund suggested that activist investors will pressure Ballmer to reconsider his strategy this summer, a reference to ValueAct Capital, which took a $2 billion stake in Microsoft in April and is in talks to get a seat on Microsoft's board.

"This (the results) was much more disruptive than investors have expected, with Microsoft missing its guidance in every division and guiding lower," wrote Sherlund. "Everything an activist investor could ask for."

Other Wall Street analysts were similarly dismayed by Microsoft's latest financial report.   Continued...

 
A variety of logos hover above the Microsoft booth on the opening day of the International Consumer Electronics Show (CES) in Las Vegas January 10, 2012. REUTERS/Rick Wilking