Microsoft Fall Hard, Just as We Forecast on 7/11

Weak Revenues Spark a 7% Fall, And More to Come

Friday, July 19, 2013

Time for another follow-up: Back on Thursday, July 11^th, we told you that Microsoft (MSFT – NASDAQ) was about to lose 14% of its value.

Our advice was simple: “MSFT is now demonstrating the same congestion pattern that cost investors more than -14% last summer. This is a wonderful time to sell MSFT shares — fast.”

Starting today, half of this downside prediction is coming true. After yesterday’s close, Microsoft reported Q4 earnings of $0.52 per share on $19.9 billion in revenues, which was well below the analyst estimates of $0.75 per share on $20.73 billion in revenues.

To throw salt on the wound, MSFT also cut its operating expense guidance for fiscal 2014 from $31.9 billion down to $31.3 billion. Without mincing words, this was a terrible report for MSFT. On this news, MSFT shares dropped 7.2% in after-hours trading down to $32.90. As we open today’s session, it’s moving even lower. We still think it’s headed for $30.00.

After all, a talented web designer that I know — and who has worked with Microsoft for years — told me that MSFT hasn’t had at true innovation since incorporating spell-check into Microsoft Word. That was nearly a decade ago. Plus, I have Windows 8 on a laptop I use, and it has the same old problems as every other MSFT product: Bugs, irritating stoppages, and a host of non-intuitive user functionality.

Steve Ballmer can run around stage hooting and hollering all he wants, but the story remains the same. Microsoft is old news — and the stock is dead money. Today, our 14% downside forecast is half-way there. Soon, we’ll see the rest of the dip.

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