2 Big Software Firms Expect Profit Drop : Prices of Microsoft, Ashton-Tate Stock Fall in Wake of Forecasts
Microsoft Corp. and Ashton-Tate, two of the biggest publishers of personal computer software, Tuesday became the latest in the PC industry to report disappointing financial performances.
The news from Redmond, Wash.-based Microsoft stunned Wall Street, triggering a 14% drop in the value of the company’s stock as well as smaller declines among other technology issues. The most actively traded issue on the over-the-counter market, Microsoft stock closed at $53.50, off $8.50.
The company, which publishes such business programs as Word and Excel as well as the popular Flight Simulator game, predicted that profits for the quarter ending March 31 would be “somewhat less” than the $37.3 million recorded a year earlier.
Microsoft cited delays in shipping two new programs and mounting inventories of unsold products among key distributors.
In addition, the company said sales would be in the $180-million to $200-million range, down from the $200 million to $215 million that analysts said Microsoft officials led them to expect earlier this year. Although that sales level would be up from $162 million a year earlier, the current quarter’s performance marks a considerable slowing in the company’s growth rate.
The announcement renewed fears of broader problems ahead for the personal computer industry.
“The issue at stake here is that there’s slower growth ahead for personal computers,” said James Weil, an analyst with the Gartner Group in Stamford, Conn. “The problem is that the industry hasn’t realized it, and there have been over-optimistic sales projections.”
Ashton-Tate, the Torrance-based publisher of the popular dBase database management software program, said fourth-quarter profit was $13.4 million, up from $12.8 million from the year before but below analysts’ forecasts of about $14 million. Revenue for the period was $87.3 million, also lower than most analysts expected but up from $75.5 million last year.
For the full fiscal year ended Jan. 31, Ashton-Tate’s profits were $47.7 million, nearly 11% higher than the $43.1 million reported last year. Full-year revenues were $307.3 million, up 15%.
In over-the-counter trading, Ashton-Tate shares dropped $1.50 to close at $21.
The announcements from Microsoft and Ashton-Tate were the latest in a string of disappointing developments in the personal computer industry.
Last month Apple Computer said its profits for the current quarter could lag last year’s by as much as 45% due to slower sales of its top-of-the-line models and an oversupply of high-priced computer chips sitting in the company’s warehouses. Late last year, several computer chip makers announced losses due to declining orders from personal computer manufacturers.
“Many of these companies say that their problems are unique, but I don’t believe that,” said Bruce Lupatkin, a technology analyst with the San Frncisco investment firm of Hambrecht & Quist. “All these issues are related to fundamental demand--and demand is slowing.”
Lupatkin said he expects personal computer sales to slow to a growth rate of just 10% to 15% for 1989, down from a 30% growth rate in 1988 and a 40% rate in 1987.
Microsoft, which monopolizes the market for operating system software used by International Business Machines Corp. and IBM-compatible personal computers, said its problems should be resolved by June 30, the end of its fiscal year.
Executives said two new versions of its word-processing program, Word, which were delayed due to errors in the software, should be ready for shipping next month and added that sales for the final quarter of the year should reflect the strong sales of the new products.
In addition, President Jon Shirley said the overstocked distributors are reducing their inventories, a development that should lead to improved results in the final quarter.
