Whither Wintel? Intel's Warned. Could Microsoft Be Next?
Half of the mighty
Wintel
duo just warned that revenue will fall short of expectations because of slowing PC sales. Can the other half be far behind?
Intel
(INTC) - Get Intel Corporation Report
, the "tel" in Wintel, on Thursday
said its fourth-quarter revenue won't reach expectations due to lethargic PC demand.
Microsoft
(MSFT) - Get Microsoft Corporation Report
, meanwhile, is Wintel's other half. It makes the "Win" in Wintel,
Windows
software.
And analysts in recent days have begun worrying about Microsoft.
On Thursday, for instance,
Goldman Sachs
analyst
TheStreet Recommends
Rick Sherlund
issued a report cutting his sales and earnings estimates for Microsoft. 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. (Goldman hasn't done recent underwriting for the company.)
Also on Thursday, Michael Stanek, an analyst at
Lehman Brothers
,
trimmed his 2001 earnings estimate to $1.88 a share from $1.91. He also slashed his revenue outlook by $630 million to $25.9 billion. (Lehman hasn't done recent underwriting for Microsoft.)
And at last week's
Credit Suisse First Boston
tech conference in Arizona, Microsoft Chief Financial Officer John Connors wondered if the downtrodden stock market would hurt consumer PC purchases this holiday season. Microsoft declined to comment for this story.
Beyond Intel, there's plenty of other evidence to point to problems for Microsoft, including recent warnings from
Gateway
(GTW)
and
Apple
(AAPL) - Get Apple Inc. Report
, both of which cited weak PC sales.
Microsoft is considered vulnerable because it depends so much on PCs. A full 70% of its revenue is still related to PC desktops, said Chris Shilakes, a
Merrill Lynch
analyst. (Merrill hasn't done recent underwriting for the company.) But Goldman's Sherlund estimates that consumer PC sales account for only about 10% of Microsoft's total revenue, and it's consumer PC sales that are hurting the most. Yet it may only take that 10% to cause Microsoft to tag along with Intel.
