Microsoft shares slump on delay of Windows 97 Updated system won't be ready for market at Christmas

March 25, 1997|By BLOOMBERG NEWS

REDMOND, Wash. -- Windows 97 might well become Windows 98. And that news sent Microsoft Corp. shares tumbling yesterday, after the company said the next version of its operating software wouldn't be on the market in time for Christmas sales.

Microsoft closed down $3.875 at $90.125 yesterday after having been as low as $87.50. With 23.3 million shares trading, it was the most active U.S. stock.

The announcement was Microsoft's second recent delay of a key product.

The updated Windows operating system had been expected to be released in time for the important holiday season. The delay won't have a big impact on Microsoft's earnings, analysts said, but the lag adds to uncertainty about growth among the most visible computer-related companies.

"The idea that Windows 97 could be Windows 98 is causing it [Microsoft's stock price] to go down," said Jean Orr, an analyst at A. G. Edwards & Sons.

In the past week, industry leaders such as Cisco Systems Inc. and 3Com Corp. told investors that business was sluggish in the first two months of the year. The Nasdaq stock market, which features technology bellwethers including Microsoft and Intel Corp., is down 12 percent from its all-time high in January.

Cisco fell $2.125 to $47.125 yesterday, while Intel battled back from early weakness to end the day 12.5 cents higher at $130.625.

Microsoft told computer makers that the finished version of the updated Windows 95 wouldn't be ready for them to put in PCs by the holiday season, said Jonathan Roberts, Microsoft's director of product marketing for Windows.

The Redmond, Wash.-based company plans to have a test version ready during the first half of 1997, and hasn't set a ship date for the final version, he said.

"People are concerned about a delay in the next major revision of Win 95," said Frank Michnoff, an analyst at Donaldson, Lufkin & Jenrette.

Microsoft earlier pushed back the release date for its updated Windows NT operating system, used largely by business customers. Windows NT 5.0, which customers expected by the end of 1997, is likely to be available in 1998, Roberts said.

Since Microsoft is expected to let Windows 95 users have free copies of the updated Windows 95 software, there won't be a big impact on earnings, DLJ's Michnoff said. Also, revenue from the update has been figured into 1998 results, rather than 1997's, said Chris Galvin, an analyst at Hambrecht & Quist.

Pub Date: 3/25/97

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