Microsoft Investors, You Have Been Warned

Updated from 2:42 p.m. EST

SAN FRANCISCO -- With Intel(INTC Quote) tearing down fourth-quarter revenue expectations for the second time due to an arid global PC market, how are you feeling about any near-term upside in Microsoft(MSFT Quote) shares?

The software maker's stock did take its requisite hit of 3% to $20.13 off the Intel news, falling even further to $19.51 by day's end, but investors are now forced to determine if a similar adjustment to longer-term expectations has to be made.

The warning from Intel, which said Wednesday that revenue in its fourth quarter will now fall 23% from a year ago to $8.2 billion -- a mere half-billion below what Wall Street analysts had expected -- wasn't a complete surprise.

Several Intel-watchers had been expecting, or at least had raised the idea of, another warning from the company following similar news from Advanced Micro Devices(AMD Quote) and overall blah reports from the industry over the past month that inventories were re-bloating.

(Kudos, by the way, to a DigiTimes report on Dec. 9 that cited sources who scoffed at Intel's first fourth-quarter warning as still too optimistic, nailing it further with the idea that revenue would come in as low as $8.2 billion).

But it had all been going so well since late November, hadn't it? Tech stocks had gained more than 27% from what was now certainly a bottom in the market, and now that we'd all regained one-fourth of our retirement funds, the prospect of muddling through an economic recovery was suddenly a little more palatable.

Microsoft shares, which were climbing toward $21 before Intel spoiled the day, had done their own rebounding in the past six weeks. Oppenheimer analyst Brad Reback made one of the calls of last quarter, if not the year, on Nov. 21 when he presciently upgraded Microsoft at its 52-week low, saying essentially that the stock was just too cheap despite the upcoming macro-economic headwinds.