Microsoft shares fall on news of delayed Windows 98 release

Journal Record, The (Oklahoma City), Sep 16, 1997 by Mylene Mangalindan Bloomberg News

REDMOND, Wash. -- Microsoft shares fell 5.2 percent on Monday after the software company confirmed that it will delay the release of Windows 98 until the second quarter of 1998.

Shares of the Redmond-based company fell 73 to 130 11/16 in trading of 16.1 million, twice the three-month daily average of 7.6 million. It was the second most active stock in U.S. composite trading.

Windows 98, the updated version of the Windows 95 operating system, was originally slated for release in the first quarter of 1998. Microsoft wanted Windows 98 to be compatible with its older Windows 3.1 operating system as well as with its more recent Windows 95, so the company decided to delay the release of Windows 98, spokesman Ed Suwanjindar said. "I view this as a real overreaction," said Esther Schreiber, an analyst at Credit Suisse First Boston. Windows 98 doesn't have "a huge upside revenue potential," because the product wasn't a corporate release. She said analysts didn't expect Windows 98 to affect the company's earnings significantly. Shares of other technology stocks fell, led by networking equipment companies and other software companies, including Oracle, Computer Associates and Informix. Networking company Ascend Communications fell 2: to 322 and Cisco Systems Inc. fell 22 to 69:. Analysts have said Windows 98 won't be as significant as Windows 95, although it'll be important in helping the company gain market share for Internet browsers from Netscape Communications Corp. Windows 98 will integrate its updated Internet Explorer browser into the operating system, making it easier for users to access Web pages. The real moneymaker for Microsoft will be Windows NT 5.0, which is expected in the second half of 1998, Schreiber said. "No one has anything in their models for Windows 98, and if they do, it's minimal," she said. Goldman, Sachs analyst Rick Sherlund wrote in a report Monday that Windows 98 "was to initially offer only upward compatibility with Windows 95," with Windows 3.1 compatibility following about three months later. Original equipment manufacturers pressed Microsoft to make Windows 98 compatible with Windows 3.1 at the time of its initial release, which led to the delay. Release to OEMs may come in April, Sherlund wrote. Windows 95 has driven Microsoft's earnings growth over the past eight quarters since its release in August 1995. "They decided to integrate the upgrade of the 3.1 path at the same time as the release of Windows 98," Suwanjindar said. "It's going to cause a significant amount of development."