Microsoft shares hit 52-week low
Microsoft Corp. shares dipped to a new 52-week low Friday after the company said it planned to significantly beef up investments in many areas where it is not dominant, but refused to provide details.
Analysts said such investments, while risky, may pay off in the long term but could hurt more immediate financial results.
Microsoft shares fell $3.06, or more than 11 percent, to $24.19 in midday trading on the Nasdaq Stock Market. Shares have traded between $24.25 and $28.38 over the past 52 weeks.
The change in strategy was particularly stinging because Microsoft executives have long been touting a wave of major product launches, whetting many analysts’ appetites for profits in the coming months and next fiscal year.
“Wall Street had been kind of primed for massive product launches, thinking, ‘OK, this is it, after years of waiting we’re finally going to get a big increase in earnings,” said analyst Jonathan Geurkink with Ragen MacKenzie.
But when the company surprised analysts Thursday by signaling it intends to spend a big chunk of money on new products, there was “the sense of feeling like the rug has been pulled out,” Geurkink said.
The company announced the change in strategy as it laid out lower-than-expected earnings guidance for its current fiscal fourth quarter, which ends in June, and its 2007 fiscal year. At the same time, it reported earnings for its fiscal third quarter that fell below Wall Street expectations.
Analyst Mary Meeker of Morgan Stanley downgraded the stock to “equal weight” from “overweight,” citing concerns that the company was not going to be able to get more leverage from such a large rash of product releases.
“We are shaking our heads,” she wrote in a research note Friday.
Microsoft further confounded analysts when it refused to immediately disclose details of its new investments. Instead, the company pointed generally to more than a dozen initiatives under way, including selling software as a service over the Internet, security, and further investments in its Windows Live and MSN online properties.
•General Motors Corp. Chairman and Chief Executive Rick Wagoner’s 2005 compensation was cut by almost half as the automaker lost billions of dollars and its credit rating was slashed to junk status, according to a proxy statement filed Friday with federal regulators.
Wagoner received a package worth nearly $5.5 million in 2005, 46 percent lower than the $10 million package he received in 2004.
Wagoner’s salary remained at $2.2 million, unchanged since 2003. He received no bonus for the year, compared to a $2.5 million bonus in 2004. He was granted 400,000 stock options with a current value of $2.8 million. In 2004, his 400,000 stock options had a value of $5.1 million.
Wagoner also received $345,082 in personal benefits, including $198,520 for security and $95,856 for use of the company aircraft.