Analyst downgrades, Ozzie critique push down Microsoft shares

Software giant seen as falling behind in mobile computing

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Microsoft wasn't feeling the love on Monday.

The day started with a downgrading of its stock by two analysts who expressed concerns about the sagging personal computer market and the software giant's belated response to the rise of tablet devices.

Shares of Microsoft (NASDAQ: MSFT) ended trading down 19 cents, or 0.7 percent, to 25.19.

Then there was the long memo outgoing chief software architect Ray Ozzie posted on his blog. Ozzie (gently) took Redmond to task for failing to recognize and capitalize on technology trends that don't include PC operating systems. (I wrote about it here, and there's also a good analysis of Ozzie's memo in the San Francisco Chronicle.)

In his downgrading of Microsoft to Sector Perform from Outperform, Brendan Barnicle of Pacific Crest wrote that "Microsoft needs a compelling growth strategy and a clearer consumer strategy, in our view, to re-ignite [the stock] and produce outperformance."

David Hilal of FBR Capital Markets, who bumped down Microsoft from Outperform to Market Perform, wrote that tablet devices such as Apple's iPad are likely to hurt Microsoft because the company no longer can get away with using its size to dominate a sector.

"[G]one are the days when Microsoft could be late to the market, but, through immense resources, catch up and be relevant. The vendors it is catching up to today are much stronger, and the adoption curves are much greater, thereby exacerbating the problem of being late to market,” Hilal said.

Earlier this year Apple surpassed Microsoft in market capitalization and now is the world's largest technology company. And Google, which is gobbling up mobile OS market share with Android, has enough heft to go toe-to-toe with Redmond.

Microsoft is scheduled to report fiscal Q1 results after Thursday's market close. While analysts expect strong revenue gains and earnings per share, concerns and questions about the software giant's ability to compete in the mobile market and "post-PC world," as Ozzie puts it, are sure to color perceptions of the quarterly results.

Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.

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