Bloomberg headline: Microsoft’s Dollar Alarm Raises New Worry for Software Stocks
* The strong US dollar is expected to weigh on software profits
* Microsoft and Salesforce have warned of dollar-related drags
Software makers that have been battered amid this year’s stock slump were dealt another blow this week when Microsoft Corp. warned of even more headwinds coming down the pike.
The world’s largest software maker cut its profit forecast for the current quarter on Thursday and blamed the surging US dollar for an upcoming drag on its earnings to the tune of $460 million. The company’s rare mid-season revision took markets by surprise and briefly sent futures on the S&P 500 Index tumbling.
Microsoft and other large US software makers such as Oracle Corp. and Adobe Inc., have complex global operations and higher exposure to foreign currencies. The US Dollar Index has risen more than 7% off a January low, and last month hit its highest in two decades. The more expensive dollar is bound to add to pressures already threatening the companies’ margins such as higher costs.