Sam McDermott plays a Fable III PC game "at the Microsoft booth at the 2011 International Consumer Electronics Show (CES) in Las Vegas, Nevada, January 9, 2011.
Credit: Reuters/Steve MarcusSEATTLE | Fri 29 april 2011 6: 33 pm EDT
SEATTLE (Reuters)-Microsoft Corp shares fell as much as 5 percent on Friday, a day after the software company a dip in sales of its Windows operating system reported.
the world's second-largest tech company behind Apple Inc. met Wall Street earnings estimate and beat on the total sales in its earnings report on Thursday.
But investors were busy with lower personal computer sales nag Windows, Xbox sales bringing down profit margins and losses in online business.
Microsoft shares closed 3 percent at $ 25.92 on Nasdaq after a late-day rally. Earlier in the they hit a low of $ 25.36, had a decrease of 5 percent that would have been the largest one-day percentage decline since July 2009, the shares closed at that level.
The shares ended around the level they were on Monday, before a run-up to quarterly figures. The stock was sharply after chip maker Intel Corp forecast earnings above Wall Street estimates, feeding optimism that a dip in sales last quarter PC a long-term trend has not indicated.
"Everyone, including myself, hit the table on the Intel trade," said analyst Colin Gillis BGC Partners. "And it just doesn't happen."
PC sales fell 1% last quarter, according to research firm Gartner [ID: nN13301394]. Microsoft's results show that, although it said business question was surpassing the weak consumer demand for PCs.
The stock is down 16 percent in the last 12 months, compared with a 16 percent gain in the Nasdaq.
"There were two catalysts for the sharp fall of Microsoft," said Joe Cusick, senior market analyst at Chicago-based firm online brokerage optionsXpress. "One, the stock broke through the 200-day moving average of $ 26.08, and UBS lowered their target price for the stock."
UBS analyst Brent Thill on Friday that its price target on Microsoft $ 32 from $ 35 cut, citing the long-term threat of the tablets to the traditional PC business.
"Even though they had good earnings, the PC market and there is still uncertainty about whether or not Microsoft with the growing Tablet and handheld devices from the likes of Samsung and Motorola can compete," said Cusick.
Options traders, many of whom bets on Microsoft shares jump earlier in the week--maybe as a hedge placed the possession of the stock in the case of a fall--moved to a more critical mode.
"There is nothing too rosy in Microsoft options trading on Friday, compared with some of the bullish trade we saw for revenue," said Caitlin Duffy, equity options analyst in the Interactive Brokers Group in Greenwich, Connecticut.
"For the most part, we see sell call options in the short term," she said, indicating traders are looking to get rid of their rights to the shares to buy.
Microsoft analysts generally kept their belief that Microsoft a rough patch in PC sales will survive. 25 of 35 analysts surveyed by Star Mine recommend buying the stock. Only says sell.
As a result of the decline of Microsoft's it is close to be overshadowed by old enemy IBM in terms of market value. Apple, which Microsoft struck last year, is the most valuable U.s. 321 billion dollar tech company, Microsoft is second 225 billion dollars and IBM is third 207 billion dollars.
(Reporting by Bill Rigby and Doris Frankel. Edit by Robert MacMillan, Bernard Orr)
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