Microsoft Shares Slump 4.4%

Concerns about Microsoft’s Internet strategy and Windows 95 sales caused the company’s stock to drop over $4 a share in trading Thursday.

The fall came as a one-two punch on Wall Street.

First, a pre-eminent New York stock analyst dropped Microsoft from his list of “recommended” stocks, saying he was unimpressed with the company’s strategy for capitalizing on the Internet, the global computer network that has exploded in popularity this year.

Then California-based Dataquest, one of the most-watched industry research firms, said Microsoft would sell only two-thirds as many copies of Windows 95 as expected this year. Windows 95, the company’s upgrade of its computer operating system, was launched with worldwide fanfare in August and is expected to be the biggest-selling software program in computer history.

Dataquest initially had said Microsoft would sell 30 million copies of the program, at a retail price of $89 apiece, by the end of the year. Thursday it cut that forecast to 20 million, saying corporate customers were slow to switch to the new system.

The stock closed down $4.125 at $89.875.

Microsoft Spokeswoman Erin Carney said Thursday that the company is happy with Windows 95 sales and feels confident about its Internet positioning. “‘Every business division in this company is focused on the Internet, and we intend to be well-positioned in the long term.”

The company’s stock reached a high of $109 in July then dropped to $81 last month as investors worried it had become overvalued. The stock began a steady rebound in late October, though, after Microsoft posted a record quarterly profit and said it was happy with reports that 7 million copies of Windows 95 had been sold.

In the past few months, Microsoft executives - aware of concerns about their Internet plans - have spent more time touting their Internet strategy. Chairman Bill Gates focused exclusively on the Internet this week at the Comdex trade show in Las Vegas.

Some industry insiders, however, believe the Internet could eventually overtake the Microsoft-dominated world of desktop computing. Under this vision, computer users would use simplified machines to run word-processing and other tasks directly through the Internet network. This would eliminate the need for complicated desktop software that now performs these tasks.