After-hours traders entertained themselves tonight (after a fashion) by playing a game of follow the leader. The leader was Microsoft (MSFT) - Get Report, and the direction was down.

The world's biggest and baddest software company reported third-quarter revenue of $5.66 billion, falling short of most Wall Street expectations. The company attributed the shortfall to light demand for business PCs in the quarter. Mister Softee was also "guarded" about near-term growth, CFO John Connors said in a statement.

That was more than enough to get postclose traders to pummel Microsoft shares on both

Instinet

and

Island

. The stock slid 4 7/8 to 74 1/16 on 1.16 million shares on Instinet and 5 1/16 to 73 15/16 on 220,000 shares on Island.

The Redmond Menace reported third-quarter profits of 43 cents a share, topping the

First Call/Thomson Financial

estimate of 41 cents and the often inflated whisper number of 42 cents. The company also improved on profits of 35 cents posted this time last year. But that was cold comfort in light of the revenue miss and that "guarded" forecast.

Bored late-night traders should spend the duration of the trading session deciphering what Microsoft meant by "guarded," why the word was put in quotation marks in the company statement and if it has anything to do with Microsoft's plan to take over the world.

The day session was kinder to Microsoft, lifting it 1/4 to 78 15/16 on 26 million shares.

But now, more Microsoft-led selling is likely on Monday, said Matt Johnson, head of Nasdaq trading at

Lehman Brothers

. On a lack of economic news early next week, Microsoft's earnings performance will give trading direction, he said.

Other late-night stocks proved they couldn't think for themselves, copying Microsoft's slide.

Exodus

(EXDS)

overdid it on the sympathy losses, falling 5 1/4 to 102 on 50,000 shares on Island. The company reported a loss of 23 cents a share, beating the 25-analyst estimate by 3 cents. In the Internet world, and elsewhere, that is considered good, but late night traders were having none of that.

Paranoid traders also sent

Pervasive Software

(PVSW)

down 3 11/16 to 7 1/4 on 14,000 shares on Island. Why? Paranoid traders complained that the stock was omnipresent. It also reported third-quarter losses of 36 cents a share (excluding items). This is kinda bad if you consider that last year the all-encompassing company reported profits of 10 cents a share, and Wall Street estimated it would lose just 30 cents a share this time around.

This information is provided by Instinet, a wholly owned subsidiary of Reuters (RTRSY) . For further information, please contact Instinet at www.instinet.com.

Island ECN, owned by Datek Online, offers trading, mainly in Nasdaq-listed stocks, from 8 a.m. to 8 p.m. EDT.

Confused?

TheStreet.com

explains how the rules change when the sun goes down in Investing Basics: Night Owl, a section devoted to after-hours trading.