Microsoft Stock Stung by Windows 2000 Criticism
SEATTLE — Shares of Microsoft Corp. fell 6% Friday as an industry analyst estimated that up to 25% of Windows 2000 users will have problems with the new software.
Michael Gartenberg, vice president of the Stamford, Conn.-based Gartner Group, said one in four companies will have problems getting Windows 2000 to work with existing programs and systems. The latest version of Microsoft’s business operating system, designed to replace Windows NT 4.0, is to debut next week.
“That kind of rate is to be expected, however,†Gartenberg said late Friday. “People who take the time to prepare for those kinds of problems will be fine. But people who just jump out of the plane and pull the rip cord without double-checking everything may have a problem.â€
Also raising investor concerns were comments made late Thursday by Michael Dell, CEO of Dell Computer Inc., in a discussion of his company’s earnings report. Dell said that the corporate adoption of Windows 2000 will likely be slow and that the rival Linux operating system is gaining ground.
“We don’t see a massive, immediate acceleration due to Windows 2000,†Dell said in a conference call.
The combination of news sent Microsoft shares tumbling, down $6.06 to $99.94 in heavy Nasdaq trading.
Gartenberg said he was surprised by the market reaction to his comments, since the Gartner Group had made similar statements in the past.
“I think as the launch [of Windows 2000] gets closer, people are obviously taking a closer look at this,†Gartenberg said. “I think that may have something to do with the reaction.â€
The Gartner Group is one of the top technology consulting firms in the industry. It talks with computer system administrators throughout the business world, as well as with Microsoft engineers and competitors, to come up with its analysis.
Gartner Group has predicted that 15% to 20% of Microsoft’s business customers will move their computer systems from Windows NT 4.0 to the new Windows 2000 system by the end of the year. Gartenberg added that up to 45% of Microsoft customers would make the move by the end of 2001.
“That’s not a bad migration pattern for any new software,†he said.
Microsoft has said that it expects its revenue to reflect the new operating system starting in the third quarter of the year and growing into the fourth quarter. Microsoft’s fiscal year ends Sept. 30.
Microsoft had no immediate response to Gartenberg’s comments.
Credit Suisse First Boston analyst Michael Kwatinetz said an immediate rush to Windows 2000 was not to be expected. He focused instead on Dell’s positive remarks about the alternative Linux operating system, saying those comments could be more significant.
“He [Dell] gives the feeling that there are some other new operating systems that are going to pose a challenge to Microsoft,†he told Reuters.
Warburg analyst Charles Wolf agreed that positive comments about Linux could steal Microsoft’s momentum.
“The Linux comments are obviously a negative,†he said. “A lot of the ‘dot-com’ small companies are jumping on it because it’s cheap and works. Let’s not say it is the next coming, but it is a negative to Microsoft in that it takes away from its ability to take share in the small-business space.â€
Reuters was used in compiling this report.
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