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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: codawg who wrote (26966)	7/21/1999 12:30:00 AM
From: taxman	Respond to of 74651

Microsoft Seen Discussing Slowdown, Tracking Stock at Meeting Seattle, July 20 (Bloomberg) -- Microsoft Corp. executives are expected to elaborate on their warning of slowing revenue growth and their possible plans for a tracking stock at the annual financial analysts meeting on Thursday. Chief Financial Officer Greg Maffei warned yesterday that revenue growth in fiscal 2000, which started July 1, will slow because of weakening demand for personal computers, the year 2000 software problem and global economic conditions. He also said the world's biggest software maker is considering issuing a tracking stock that would reflect its online business, though it has no ''imminent'' plans to do so. Microsoft traditionally uses its meetings with financial analysts to lower expectations for its performance. Chairman Bill Gates and other top executives usually outline plans for new products as well. ''A lot of analysts are looking for answers to those questions'' about a tracking stock, said Aaron Scott, an analyst at Advest Inc., who has a ''buy'' recommendation on Microsoft. Maffei's comments came after the company reported fiscal fourth-quarter earnings that beat per-share estimates by 4 cents. Profit jumped 62 percent on strong sales of its Office 2000 group of business software. A tracking stock would group together Microsoft's MSN network of Web sites and possibly other online assets in a bid to fetch high Internet prices, create a stock to use in acquiring other companies and attract high-caliber management, analysts said. The MSN network includes sites ranging from Expedia online travel bookings to Hotmail Web-based e-mail. Lofty Internet valuations give Yahoo Inc.! a price-to- earnings ratio of 284, or four times Microsoft's 67. Slowing PC Sales In his comments to analysts and investors yesterday, Maffei cautioned about slowing PC sales without giving specific forecasts. An elaboration will follow at the financial analyst meeting, he said. ''What Microsoft is talking about isn't news,'' Scott said. ''They've been talking about that for a while,'' he said, adding that PC makers are expecting sales growth to slow to 15 percent to 18 percent. Microsoft's caution about global economic turmoil puzzled analysts. ''Global economic crisis, huh?'' Lehman Brothers' Michael Stanek asked rhetorically. He rates Microsoft a ''buy.'' Microsoft, which is based in Redmond, Washington, has been warning about the year 2000 software bug for at least a year, including at last year's analyst meeting. The problem centers on the inability of some software to read the year 2000 properly because it recognizes only the last two digits of the year and mistakes 2000 for 1900. Maffei also said the operating margin, the ratio of operating income to revenue, is unlikely to grow in fiscal 2000 and may shrink. It was 50 percent in the fiscal fourth quarter. At the analysts meeting, Gates and senior executives are expected to talk about Windows 2000, one of the most important new products since Windows 95. The next upgrade of the industrial- strength NT operating system, Windows 2000 will go on sale in the second half of this year, Microsoft says. Microsoft shares today fell 5 1/16 to 93 5/16. ©1999 Bloomberg L.P. regards