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November 6, 2007

Goldman note knocks MSFT off high horse

Posted by Benjamin J. Romano at 10:13 AM

After an impressive run in the six trading days since it reported outsized first quarter earnings, a note to investors Monday from analysts at Goldman Sachs is weighing on Microsoft's stock today.

Goldman analyst Sarah Friar told clients she's removing Microsoft from the Americas Conviction Buy List because "[c]urrently we believe there is more
near-term upside in Oracle, now that Microsoft's 1Q earnings catalyst has
passed."

Friar noted that Microsoft shares are up 21.1 percent since Oct. 16, when she added the company to the Conviction Buy List, compared with the S&P 500, which was down 2.4 percent in that period.

She remains positive on Microsoft, and has a "buy" rating on the stock and a 12-month price target of $39, pointing to the company's strong product cycles, including Windows Vista and Office 2007 adoption by businesses and anticipation of strong Xbox 360 sales over the holidays.

"That said, the stock's 15% move since earnings has tempered the risk/reward somewhat, although in our view Microsoft also remains a good defensive play in a tougher spending environment given portfolio breadth, balanced international
exposure, discounted valuation and product cycle tailwinds."

Shares were down 66 cents to $36.07, 1.7 percent, in early afternoon trading today on the Nasdaq.

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