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Goldman Cuts Forecast for Microsoft

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Goldman Sachs


Rick Sherlund has a simple answer to the much-discussed question of whether the PC sales slowdown will affect


(MSFT) - Get Microsoft Corporation Report

-- it will.

In a report Thursday, Sherlund cut his sales and earnings estimates for the software king. For the second quarter ending Dec. 31, Sherlund reduced his revenue estimate by $125 million to $6.78 to $6.8 billion. He also cut his revenue estimate for the March quarter by $200 million and for the June quarter by $150 million. Sherlund's estimates for those quarters weren't available.

On the earnings side, Sherlund reduced his fiscal 2001 estimate to $1.88 a share from $1.91. The company's fiscal year ends in May. He maintained his market outperform rating. (Goldman hasn't done recent underwriting for the company.)

Microsoft's stock was recently down $3.81, or 6.7%, to $52.88.

Sherlund's note comes just after


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both warned of slowing PC sales. While Apple doesn't use Microsoft software, its

talk of consumers bypassing PCs this holiday season still was considered a poor indicator for overall PC sales.

And just last week, Richard Gardner, a

Salomon Smith Barney


called Microsoft's revenue growth guidance of 17% to 18% this quarter over last quarter "aggressive." He cited the PC sales slowdown. (Salomon hasn't done recent underwriting for Microsoft.)

Sherlund wrote that Microsoft's "management has not changed their posture on the quarter but we believe recent data suggests that street estimates may need to come down as Microsoft collects their channel sales data for the month of November."

But the analyst also noted that his estimate changes were "relatively moderate" given the fact that consumer PC sales account for about 10% of Microsoft's total revenue. And corporate demand remains in line with expectations, he said.