Tech Sector Carries Down Microsoft Shares
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News Commentary. Microsoft shares hit a new 52-week low today, in what must be characterized as a tech sector massacre. |
Just when it seemed like Wall Street's woes couldn't get any worse, the Dow plunges. Again. So, can someone explain to me why President Bush signed an unprecedented $700 billion financial bailout last week? Looks to me like investors are bailing out of the stock market.
I don't invest because of conflict-of-interest reasons, and I don't work for a public company. So I feel like a voyeur—spectator at the car crash—watching the disaster occur. Can somebody pass the popcorn?
Microsoft shares held up fairly well last week, and I think it's no coincidence that CEO Steve Ballmer was on a five-country tour shooting off his mouth. Again. Steve-o helped mollify frisky investors looking for a safe haven for their mullah. This week's loudmouth isn't Microsoft's CEO but Greenlight Capital's David Einhorn. Let's just say the hedge-fund manager is none too happy with Microsoft as an investment.
David Walks Away from Goliath
This afternoon, at Silicon Alley, Henry Blodgett excerpted the Microsoft portion of David's letter to investors. David is done with Microsoft, and he's critical, too:
Management has acted in an overaggressive and almost panicky fashion regarding its online offering. First, it sought to acquire Yahoo and then after that failed, it announced extremely high internal investment requirements to pursue this 'huge' opportunity (read: 'Google-envy'). We doubt the opportunity is what they say it is and wish MSFT focused on its core strength: software.
Google-envy? Microsoft's problem is everybody-envy. The grass—eh, money—is always greener somewhere else. Microsoft obsessed with AOL in the early 1990s and again near the decade's end. Microsoft fretted Netscape in the late 1990s, beating the browser company but sending it to rival AOL. Google is now a five-year obsession that just keeps getting worse.
Microsoft's Google-envy earnestly started in early 2003. For about 12 months, from late 2001, MSN was the search-share leader, according to ComScore. Microsoft benefited from two-late 2001 events, related to browser/search bundling:
- Windows XP's release. Microsoft bundled MSN search with Internet Explorer, also hooking Web searches from the operating system.
- MSN search redirects. Microsoft started sending 404 page not found notices to MSN search, which dramatically drove up traffic in late 2001 through early 2002. IE was the No. 1 browser.
By early 2003, Microsoft had fallen behind Google and Yahoo, never to rise above third place in search share. By May 2003, Microsoft had announced a new aggressive search strategy and has since chased Google, which long ago left Microsoft's field of view. Microsoft expended ridiculous energy chasing Google. David is right about Microsoft management's focus being misplaced.
Market Cuts Google in Half
Microsoft shares closed at $23.23 today, down $1.68, or 6.74 percent, from the open. For comparison, on Friday, Microsoft shares closed at $26.25, down 23 cents, or 0.87 percent. On Sept. 29—the day tech stocks and the Dow died—the shares closed at $25.01, down $2.39, or 8.72 percent.
Today's close puts Microsoft shares at a new 52-week low and lowest since July 2006. Microsoft's market capitalization was $252.18 billion on Sept. 12. It's $212.1 billion today. That's right, $40 billion less.
It's unfair to single out Microsoft, and maybe there's some irony here. Wall Street's sell off has brought down Google and in ways Microsoft couldn't competitively achieve. Google shares are free falling faster and farther than Microsoft's. Google closed at $346.01 a share, down $25.20, or 6.79 percent. Today, the stock also reached a new 52-week low of $345.37.
Last Halloween, Google gave investors a treat, not trick, when the stock passed $700 a share. The high: $747.24 in early November. So in less than a year, Google has lost more than half its a value, a stunning setback that could force cutbacks in research and development, hiring and general expansion. For a more recent and palatable sense of Google's declines: Market capitalization was $157.23 billion on Aug. 13, but only $108.18 billion today. That's right, about a third less.
All Things Digital's John Paczkowski cracks me up. He titled his post on Google's woes: "Google's New Corporate Philosophy: 'You Can Lose Money Without Doing Evil'".
Eight Days Later, Shares Are Lower
A quick roundup of other tech stocks, comparing today's close to Sept. 29, when the Dow dropped 777 points:
- Apple. Today: Closed at $89.16 a share, down $8.98, or 9.15 percent. Sept. 29: Closed at $105.26 a share, down $22.98, or 17.92 percent.
- Research In Motion. Today: Closed at $55.0 a share, down $4.61, or 7.73 percent. Sept. 29: Closed at $61.73 a share, down $9.03, or 12.76 percent.
- Dell. Today: Closed at $13.55 a share, down 1.31 cents, or 8.82 percent. Sept. 29: Closed at $15.41 a share, down $1.59, or 9.4 percent.
- Salesforce.com. Today: Closed at $35.95 a share, down $4.46, or 11 percent. Sept. 29: Closed at $44.76 a share, down $5.89, or 11.63 percent.
- Intel. Today: Closed at $16.02 a share, down 91 cents, or 5.39 percent. Sept. 29: Closed at $17.27 a share, down $1.93, or 10.1 percent.
- VMware. Today: Closed at $20.81 a share, down 84 cents, or 3.88 percent. Sept. 29: Closed at $26 a share, down $3.04, or 10.47 percent.
- Cisco. Today: Closed at $18.84 a share, down $1.62, or 7.92 percent. Sept. 29: Closed at $21.79 a share, down $2.03, or 8.52 percent.
- Red Hat. Today: Closed at $13.47 a share, down $.02, or 7.04 percent. Sept. 29: Closed at $15.33 a share, down $1.08, or 6.58 percent.
- IBM. Today: Closed at $95.65 a share, down $4.97, or 4.94 percent. Sept. 29: Closed at $111.46 a share, down $4.96, or 4.15 percent.
- Comcast. Today: Closed at $17.15 a share, down 99 cents, or 5.46 percent. Sept. 29: Closed at $18.01 a share, down $2.69, or 13 percent.
Microsoft isn't alone. The whole tech sector is red. It's surprising, considering most of these companies will announce third-quarter earnings this month, and Apple, Google and Microsoft—all reaching 52-week lows today—are expected to deliver solid results.
What's that saying about when it rains and it pours on every house? Tech companies aren't immune to the great credit crunch and stock panic of 2008. My eWEEK colleague Eric Lunquist predicts the tech sector won't recover until 2010.
May it be sooner.
[Please send your tips or rumors to watchtips at live.com.]
Comments (14)
oh mother, that will be microsoft roadkill you people who dont know what stocks are will see the death of microsoft and the rise of red hat linux and china's overtaking of world affairs and the death of america forthwith. americans will all go back to the forest and behave as monkeys and china will go foreward with space research and the future of mankind or shall i say china kind and chinese culture and the death of american extremeism and drugs culture.
Die america die .
Posted by tomcat | October 7, 2008 9:35 PM
Yes i agree as the segmentation issues with microsoft software are real and stupid. i hate doing assembler with microsoft software and i do prefer red hat linux with china as our new leader in democracy and all things space age.
die america die
Posted by kit kat | October 7, 2008 9:37 PM
Stocks and bonds are the prime considertion of america at the moment and i know that when they go back to the jungle as they will have to as they owe the world plus china 9 trillion dollars then i see them as food for trees and the coming china leaders to chastize them unto the end and death.
Posted by kotkit | October 7, 2008 9:39 PM
I am not an expert on the issue, but I believe things will return to economic stability in the near future. The problem is consumer confidence and I believe that consumers yearning for innovation and new products and technologies will drive new inspiration in these companies to continue bringing products to market that consumers will be willing to spend on. I hope a new administration will also bring some new focus and direction for the country, when America catches the flu, we get pneumonia, so I hope whoever wins in November will have some vision for the different industries, not just the technology sector. Wall Street needs to be cleaned up and well regulated, more jobs need to be created.
Posted by Andre Da Costa | October 7, 2008 9:56 PM
Joe, do you own any 401K/IRA mutual funds? If so, chances are high your fund owns a percentage of stocks. My 401K has been bleeding a lot of $$$ over the last 4 weeks. The silver lining is that it is a buyers market for stocks now. I have upped my contribution rate to buy more stocks through my retirement fund. The stocks will go back up eventually.
Posted by JM | October 7, 2008 10:53 PM
Don't forget about the dysfunctional Yahoo! They closed at $14.53.
Yang and company were oh-so-smart to reject Microsoft's $30something a share buyout offer. (grin)
Posted by JohnJ | October 7, 2008 11:44 PM
Yes i agree with tomcat and kitkat and kotkit as chineese bloggers will eventually overtake the world with red flag linux and americans will have to go back to the forest and be like animals again as their share funds lose value and die in the dow. i agree with china becoming the next new super blogger power and super space nation. they will become the best thing since sliced toasters. i want to be a part of the next chinese super economy and not be so green and not have as many regulations on food products so to kill many but not too many so we china doesnt have to go back to the forest.
Posted by matkat | October 8, 2008 12:54 AM
Microsoft's days are over, maybe they know, maybe not.
The dream for developers for almost 40 years has been to write programs that will work on any machine (POSIX, Java, Web). Microsoft has struggled to make it so that you write once and run on one particular OS (even locked to one particular version of Windows).
They have done very well because of their pacts with hardware vendors so far, but those times are over. The developers are going to win and the underlying OS will be irrelevant (people use PC's to run apps not OS's).
Even investing experts who know nothing about tech are recommending Apple and Google whilst talking down MS. I have heard 2 different advisors (Einhorn makes 3) saying the same thing in the last week, and I am not even looking.
All tech stocks have taken a hit, but thats more because of how the stock market works rather than lower expectation of future returns.
Big tech IS immune to the credit crunch, they all have billions of cash in the bank so can easily outride any credit crunch (do they even NEED credit?). A dip in sales will be OK, some may even prosper.
I think they will be great once they have restructured and got rid of Ballmer and the outdated ideas that have done them well over the last 20 years they will be a good company, I think at least 10 years though.
Posted by billybob | October 8, 2008 6:55 AM
I think this market/economic adjustment will take some time. We went from a culture that saved our money to buy something, to a culture that just buys on credit and doesn't worry about the consequences. This applies to everyone, corporate or private. I think there will be a slow down as everyone pays off their credit cards and loans and goes back to saving up the money to buy something (well probably not, but at least will keep their debt lower). Anyway people and companies waste horrendous amounts of money on interest these days, even with rates so low. I think interest rates will start going up for consumers and companies (whether the fed lowers rates or not), and paying will get hard.
Posted by smist08 | October 8, 2008 11:07 AM
It's surprising, considering most of these companies will announce third-quarter earnings this month, and Apple, Google and Microsoft—all reaching 52-week lows today—are expected to deliver solid results."
Stock price reflect expectations of future earnings, not current ones. And the market is telegraphing that Apple, Google, MSFT and everyone else will be guiding down for the future and quite dramatically so (regardless of whether they make this quarter, which Google and MSFT at least may not).
Posted by paul | October 8, 2008 12:12 PM
It's surprising, considering most of these companies will announce third-quarter earnings this month, and Apple, Google and Microsoft—all reaching 52-week lows today—are expected to deliver solid results."
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Most likely it panic selling, and selling by money market accounts as well. If you have money in money market account, hedge funds, or IRA, and sell those, it most likely is also a sell on some of the tech stocks.
However, I would say that buying either Apple or Google, is a far far better buy than MS. MS just has to many issues long term. Or gold. Maybe even Sony would be a better buy than MS, but maybe even Sony will be hard hit by consumers.
There is only really two things going for MS, it huge stockpile of money, and the fact that most OEM's preinstall windows. Since Ballmer is buying back stock and wanted to blow it all on Yahoo, this has to be a worry. Second, since Vista is poorly received, and some OEM's may start to rebel, this could be a problem.
Posted by chips b malroy | October 8, 2008 1:35 PM
"Management has acted in an overaggressive and almost panicky fashion regarding its online offering. First, it sought to acquire Yahoo and then after that failed, it announced extremely high internal investment requirements to pursue this 'huge' opportunity (read: 'Google-envy'). We doubt the opportunity is what they say it is and wish MSFT focused on its core strength: software."
I wonder what the huge opportunity is?
Posted by Phrayze | October 8, 2008 1:39 PM
JM wrote: "Joe, do you own any 401K/IRA mutual funds? If so, chances are high your fund owns a percentage of stocks."
None, JM. No investments.
Joe
Posted by Joe | October 8, 2008 2:09 PM
JM wrote: "Joe, do you own any 401K/IRA mutual funds? If so, chances are high your fund owns a percentage of stocks."
sorry??
Posted by what | October 22, 2008 5:51 AM