Goldman Says Microsoft Will Delay Win 98 and Tech Stocks Tank

Publish date:

Mister Softee is melting.

After a less-than-flattering write-up in


, the Redmond, Wash.-based software empire took another blow, this time courtesy of

Goldman Sachs

analyst Rick Sherlund. In a terse report, Sherlund said


(MSFT) - Get Report

would likely push back the release of its Windows 98 operating system to May from February. That could only be seen as an unhappy development, especially given the all the hoopla that swirled around the release of Windows 95, which transmogrified from a simple software launch into a global three-ring cyber circus.

"We were all expecting it

Windows 98 to come earlier," says one trader, who watched Microsoft crash more than five points at around one o'clock when the Goldman report hit news services everywhere. "And coming on a day like today."

Microsoft slid 7 1/4 to 130 11/16. It dragged just about every other tech share -- and the tech-gorged


-- lower. The Nasdaq finished the day 14.40 lower at 1634.90. The

Dow Jones Industrial Average

, up most of the day, slid 21.83 to 7721.14. The

S&P 500

dipped 4.14 to 919.77. The benchmark 30-year bond was up 1/8, pushing the yield to 6.57%.

To be sure, not all was gloomy in Bill's World.

Salomon Brothers

analyst Neil Herman, while noting the expected delay in the software release in an interview, says now is a perfect time to step in and buy. "We'd only expected a small amount of revenue in the third quarter from Windows 98." He also estimated three- to five-year earnings-per-share growth to be significantly higher than the 20.3% estimated earnings per share growth in fiscal 1998, he wrote in a report. That's not bad for a company that posted 53.6% EPS growth in 1997.

Still, Monday's blowout helped sink a lot of ships in the S.S. Microsoft fleet. Chipmaker


(INTC) - Get Report

was off 2 1/8 to 92 1/16;



slid 1 1/8 to 64 5/16; drive maker



fell 5/16 to 35 1/4;

Western Digital

(WDC) - Get Report

dipped 2 to 44; and


(ORCL) - Get Report

, which announces earnings results Tuesday, slipped 5/8 to 38.

International Business Machines

(IBM) - Get Report

slipped 1 1/2 to 96 1/4. Big Blue unveiled new models and announced it's


software subsidiary would merge with

Unison Software


. UNSN was up 5/8 to 14 1/2.

The tech debacle wasn't limited merely to Wintel plays. The networkers, taking their lead from


(ASND) - Get Report

, also slid. Ascend was down 2 5/8 to 32 1/2 after both

Hambrecht & Quist


Goldman Sachs

cut their outlook for the company's earnings. Fallout from the actions took down the usual suspects:


(CSCO) - Get Report

fell 2 11/16 to 69 3/4;



slipped 7/16 to 19 11/16; and



was off 1 3/16 at 48 15/16.

In non-tech news:

Sara Lee


rose 6 3/4 to 49 5/16 after

Goldman Sachs


Donaldson, Lufkin & Jenrette


Deutsche Morgan Grenfell

raised their ratings on the issue. The company, which makes everything from snacks to underwear (don't dwell on that too long), said it is restructuring and may divest itself of some of its more far-flung operations.

Tobacco stocks sputtered amid concern Congress would drag its feet on the proposed $368.5 billion settlement struck earlier this year.

Philip Morris

(MO) - Get Report

fell 1 7/16 to 41 3/16;

RJR Nabisco

(RJN) - Get Report

dropped 1 3/16 to 32 7/8.


fell 1 1/2 to 51 7/16 after

CS First Boston

cut its earnings outlook to $2.25 from $2.35 per share. The company has had production problems as it integrates new workers to meet demand and has difficulty securing parts.

Paper maker


(KMB) - Get Report

rose 1 to 45 13/16 after

Salomon Brothers

upgraded the issue.

American Home Products


after the company voluntarily withdrew weight-loss medication from the market. The company, which estimates the recall could trim 10 cents a share from earnings in 1998, fell 3 11/16 to 73 1/4.


(IR) - Get Report

fell 13/16 to 39 1/4 after it announced it would buy



unit. The company's debt was also downgraded by both





King World Productions


rose 1 7/16 to 40 3/4 after talk show queen Oprah Winfrey agreed to two more years of her popular TV chat program.

And expect

Eastman Kodak


to slump Tuesday. The film maker warned after the bell that sales and earnings for the third quarter would be lower. EK fell 4 to 61 1/2.