39 Steps Down: Goldman Cuts Estimates on Microsoft and Dozens More

Software ax Sherlund earns the title, cutting earnings numbers as he questions the timing of a recovery.
By Eric Gillin ,

(Updated from 8:41 a.m. EDT)

Goldman Sachs

swung into overdrive this morning, unleashing lashes on a host of technology companies.

Analyst

Rick Sherlund said a recovery in the software industry would be slower than anticipated. He trimmed revenue and earnings expectations for

Microsoft

(MSFT) - Get Report

and nearly 20 other software companies. His colleague, analyst

Laura Conigliaro, took down revenue and earnings targets on a slew of other tech names. All told,

Goldman knocked 39 companies down the steps.

Back in April, when Sherlund last trimmed estimates, he assumed the upcoming December quarter would show a bounce. Not anymore. He now believes that bounce could be smaller or nonexistent. Sherlund's broad call reached across a wide variety of sectors, including enterprise applications, supply-chain management solutions, PC software and infrastructure.

Among the companies mentioned:

Ariba

(ARBA)

,

Broadvision

(BVSN) - Get Report

,

Commerce One

(CMRC)

,

FreeMarkets

(FMKT)

and

Siebel Systems

(SEBL)

.

Sherlund said he continues to believe in the long-term outlook for tech, but given the current economic climate he doesn't think companies can meet near-term growth targets.

Conigliaro also said the recovery, when it comes, "will be more moderate." Her revisions were based largely on a continuing softening of European demand, as well as a possible slowdown of tech expenditures in Japan. Then there's the foreign exchange problem, she said. "Many companies will experience 500 - 600 basis points of negative top line impact from the ongoing effects of a strong dollar relative to the euro, pound, and yen."

From Conigliaro's coverage of the enterprise server sector,

Brocade Communications'

(BRCD)

fiscal 2001 revenue forecasts were cut to $516 million from $521 million and

EMC's

(EMC)

2001 revenue target was cut to $9.595 billion from $10.115 billion, while its long term growth outlook was revised to 23% from 25%.

Sun Microsystems'

(SUNW) - Get Report

growth forecast was cut to 17% from 20%.

Conigliaro also lowered her revenue forecasts on

Hewlett-Packard

(HWP)

,

IBM

(IBM) - Get Report

,

Network Appliance

(NTAP) - Get Report

and

Storage Technology Group

(STK) - Get Report

.

Almost all of Conigliaro's calls place her estimates below the current consensus among analysts polled by earnings tracker

Thompson Financial/First Call

.

Conigliaro said her revisions are not meant to "signal precision," but rather reflect a more general and ongoing weakness in the U.S. technology sector. As earnings season picks up, she said, each company's future guidance will be more important to Goldman's models than the actual earnings. (

TheStreet.com

just wrote a preview of what the upcoming

earnings season will bring.)

Bottom line: "We have seen very few signs of real improvement within U.S. technology companies although there is some evidence that we could be bumping long a bottom, albeit a low one," Conigliaro wrote.

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