Finance behemoth Goldman Sachs has downgraded the rating of Microsoft's stock from Neutral to Sell in a report that went out to investors this morning. The rating change was based on what analyst Heather Bellini sees a downward trend for Microsoft's PC-based business and dwindling demand for those products.
“The company faces critical secular challenges given the deteriorating PC demand backdrop,” Bellini wrote. Financial results will “gradually deteriorate unless Microsoft successfully repositions itself as a more meaningful participant in the new era of consumer compute.”
Bellini isn't the only analyst to recommend dumping Microsoft stock. Rick Sherlund, of Nomura Holdings Inc., and Stephen Turner, of Hilliard Lyons, both downgraded Microsoft from Buy to Neutral. The result has been nearly a 5% drop in stock value so far today.
Weak business demand for Redmond's Windows 8 and a recent, slightly-misleading IDC report showing a 14% drop in PC shipments in the last year are surely to blame here. Not to mention overall disappointing sales of the Microsoft Surface tablet.
Though, admittedly, PC sales, especially in the corporate world, are Microsoft's bread and butter, Bellini's analysis seems to omit the slow and steady growth of Windows Phone 8. Even more importantly, is Microsoft's dominance in the gaming world with Xbox, which is slated to release its next-generation console in the near future.
Sure, consumer computing has changed in the past few years, but Microsoft is clearly aware of that. The real question is, can they ramp up and change fast enough to stay in the race for relevance? There are no signs of them slowing down just yet, so you may want to move your cursor away from the sell button for the time being.
Of course, if I really knew that much about the stock market, I probably wouldn't be typing this article right now.