Goldman Sachs, citing accelerating deterioration in PC trends and a lack of traction in tablets and smartphones, cut Microsoft (MSFT) to “sell” from "neutral".
The New York-based brokerage cut its view on the Silicon Valley software maker also lowered its fiscal 2013 and 2014 estimates.
“While GDP is expected to improve, which will benefit IT spend, we see other companies under coverage as better positioned to benefit versus Microsoft,” Goldman analyst Heather Bellini said in a note to clients, citing “secular challenges” amid a “deteriorating PC demand backdrop.”
The bleak note comes a day after BGC Partners downgraded Microsoft to “hold” citing “turmoil in the PC industry.” The IDC earlier this week increased the decline it is anticipating for PC shipments in the March quarter to a 7.7% decline compared with a 1.3% drop previously.
Shares of Microsoft slumped 5% to $28.81 following the news. They have risen about 8% since January, but remain off about 53% from all-time highs reached in late 1999.
Goldman Sachs predicts PC market share to fall to 59% in 2013 from 73% last year, which it believes will be a blow to Microsoft whose Windows software appear to be facing continued “secular headwinds.”
The brokerage also said it sees consensus estimates as “too high” for Microsoft, by as much as 3% in the current fiscal year and by 5% next year.
Bellini anticipates an 11% downside to Goldman's $27 12-month target price on Microsoft.