Now, the going gets tough for Satya Nadella, the 11-month CEO of Microsoft.
Microsoft’s stock is down ~9% this morning after a rough earnings report. Microsoft delivered decent numbers, meeting expectations on the top and bottom lines, but the underlying trends were worrisome.
Nomura analyst Rick Sherlund has downgraded the stock from buy to neutral, according to Street Insider, which has his report. Sherlund is the axe on Microsoft. He’s been bullish on the stock for the past two years.
Sherlund isn’t the only one downgrading the stock. Street Insider says three other analysts have also downgraded.
Last night, Microsoft reported Windows revenue from PC manufacturers was down 13%. It also said that Windows was going to have a tough road ahead of it in general. Microsoft had benefitted from companies upgrading from Windows XP to Windows 7 last year. But that cycle is over now.
This is part of the reason Sherlund is downgrading the stock: “We reduced estimates to reflect a significantly more challenging transition ahead, with difficult comparisons ahead for traditional Office and Windows given evidence of the end of the benefits realised over the past year from the Windows XP related PC refresh cycle, some mix issues driving lower ASP’s, FX and macro issues in a few geographies.”
Until now, things had been going pretty smoothly for Microsoft CEO Satya Nadella. The stock was up 30% since he took over as he instituted a number of changes investors had long wanted. But now, he’s got to get down to the really tough task of growing Windows and Office in a world where those applications are less important than ever before.
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