Microsoft Corp. lost its status as the world's second-largest corporation to drugmaker Pfizer Inc. as the software company's slowing sales growth caused it to miss this year's stock-market rally.
Pfizer's market value has jumped to $285.6 billion, up 18 percent in 2003, as Chief Executive Officer Henry McKinnell kept the sales growing faster than the industry average by acquiring rights to new products and buying up rivals. Microsoft's market value has held around $278.7 billion. Both trail General Electric Co., with a value of $311.8 billion.
Microsoft, the world's largest software maker, slipped from its perch as computer-related shares soared. An index of computer companies in the Standard & Poor's 500 Index has climbed 21 percent this year while shares of Redmond, Washington-based Microsoft have gained 0.4 percent.
``Its earnings aren't going anywhere; even sales have slowed,'' said Rich Merriman, president of Pennsylvania Trust Co. which manages more than $1 billion in Radnor, Pennsylvania. ``In Pfizer, you've got a good grower with a dividend.''
New York-based Pfizer, the world's largest drugmaker, may not hold the No. 2 slot for long: A decline of just 2.5 percent in its share price could cause it to drop below Microsoft. Shares of Pfizer gained $1.58, or 4.6 percent, to $36.18 in New York Stock Exchange composite trading yesterday. Microsoft gained 57 cents, or 2.2 percent, to $25.96 on the Nasdaq Stock Market.
Kent Hollenbeck, a Microsoft spokesman with public relations firm Waggener Edstrom in Portland, Oregon, declined to comment on the software maker's drop to third largest in market value.
Pharmacia Purchase
The rise in Pfizer's market value reflects its $58 billion acquisition of Pharmacia Corp., bought for stock in April, and growth in drug revenue.
Sales jumped 11 percent in the first quarter. The increase exceeded last year's average rise of 7 percent in retail pharmacy sales in major markets, according to IMS Health Inc., which tracks prescriptions.
Executives told investors at a meeting yesterday in New York that Pfizer will generate revenue of $54 billion next year, with compound annual revenue growth of at least 10 percent from 2002 through 2004.
The company expects to have sought U.S. regulatory approval for 20 new products between 2001 and 2006, executives said. Chief Financial Officer David Shedlarz said Pfizer will earn $2.13 a share next year, above the $2.06 a share average forecast of analysts surveyed by Thomson Financial.
``Pfizer's a powerhouse,'' said Lynn Yturri, who counts the drugmaker as the biggest holding in his $534 million One Group Equity Income Fund.
Trailing Intel
Four of the world's top 20 companies by market value are drugmakers: Pfizer, New Brunswick, New Jersey-based Johnson & Johnson, Whitehouse Station, New Jersey-based Merck & Co. and GlaxoSmithKline Plc, Brentford, England.
Microsoft is the seventh-worst performing stock this year among the 83 members of the S&P technology index. Intel, which makes most of the personal-computer chips Microsoft software runs on, is up 38 percent. Hewlett-Packard Co. and Dell Computer Corp., the two largest makers of PCs that run Microsoft's Windows operating system, have climbed 25 percent and 21 percent, respectively.
While the S&P 500 has rallied 26 percent since its low on March 11, Microsoft has gained 14 percent.
``People are unclear what the growth outlook is for the coming year'' with Microsoft, said Christian Koch, who helps manage $50 billion at Trusco Capital Management. The software maker is shifting ``from a growth company to a slow-growth company. I don't know where the new equilibrium is for the stock.''
Ballmer's Sale
Microsoft in April said revenue growth in the 12 months beginning in July would slow to between 3.4 percent and 5.9 percent from 13 percent for the current fiscal year. Revenue, which climbed an average of 38 percent annually in the 1990s, has increased less than 15 percent for three straight years.
The company paid a dividend for the first time in March, when holders received 8 cents a share. The payout is a sign the company expects growth to remain slow, Koch said.
Some investors also are concerned by Chief Executive Officer Steve Ballmer's recent sale of $1.44 billion of shares, his first sales in 12 years. Ballmer said last month he's diversifying his assets.
Koch, who said Trusco may sell some of its 6 million Microsoft shares after the company reports earnings for the fiscal year ending June 30, isn't convinced.
``Ballmer's sale of stock was disconcerting in the current environment,'' he said. ``Diversification is just a party line.''
The CEO said in an internal e-mail this month that Microsoft faces ``significant challenges'' including a decline in computer- related spending and the popularity of competing free Linux and OpenOffice programs.
Shares of Fairfield, Connecticut-based General Electric, which makes products ranging from jet engines to television shows, have risen 28 percent in 2003. The company hasn't always been on top, though: A year ago, GE lost its ranking as the No. 1 company to Microsoft.
Pfizer's market value has jumped to $285.6 billion, up 18 percent in 2003, as Chief Executive Officer Henry McKinnell kept the sales growing faster than the industry average by acquiring rights to new products and buying up rivals. Microsoft's market value has held around $278.7 billion. Both trail General Electric Co., with a value of $311.8 billion.
Microsoft, the world's largest software maker, slipped from its perch as computer-related shares soared. An index of computer companies in the Standard & Poor's 500 Index has climbed 21 percent this year while shares of Redmond, Washington-based Microsoft have gained 0.4 percent.
``Its earnings aren't going anywhere; even sales have slowed,'' said Rich Merriman, president of Pennsylvania Trust Co. which manages more than $1 billion in Radnor, Pennsylvania. ``In Pfizer, you've got a good grower with a dividend.''
New York-based Pfizer, the world's largest drugmaker, may not hold the No. 2 slot for long: A decline of just 2.5 percent in its share price could cause it to drop below Microsoft. Shares of Pfizer gained $1.58, or 4.6 percent, to $36.18 in New York Stock Exchange composite trading yesterday. Microsoft gained 57 cents, or 2.2 percent, to $25.96 on the Nasdaq Stock Market.
Kent Hollenbeck, a Microsoft spokesman with public relations firm Waggener Edstrom in Portland, Oregon, declined to comment on the software maker's drop to third largest in market value.
Pharmacia Purchase
The rise in Pfizer's market value reflects its $58 billion acquisition of Pharmacia Corp., bought for stock in April, and growth in drug revenue.
Sales jumped 11 percent in the first quarter. The increase exceeded last year's average rise of 7 percent in retail pharmacy sales in major markets, according to IMS Health Inc., which tracks prescriptions.
Executives told investors at a meeting yesterday in New York that Pfizer will generate revenue of $54 billion next year, with compound annual revenue growth of at least 10 percent from 2002 through 2004.
The company expects to have sought U.S. regulatory approval for 20 new products between 2001 and 2006, executives said. Chief Financial Officer David Shedlarz said Pfizer will earn $2.13 a share next year, above the $2.06 a share average forecast of analysts surveyed by Thomson Financial.
``Pfizer's a powerhouse,'' said Lynn Yturri, who counts the drugmaker as the biggest holding in his $534 million One Group Equity Income Fund.
Trailing Intel
Four of the world's top 20 companies by market value are drugmakers: Pfizer, New Brunswick, New Jersey-based Johnson & Johnson, Whitehouse Station, New Jersey-based Merck & Co. and GlaxoSmithKline Plc, Brentford, England.
Microsoft is the seventh-worst performing stock this year among the 83 members of the S&P technology index. Intel, which makes most of the personal-computer chips Microsoft software runs on, is up 38 percent. Hewlett-Packard Co. and Dell Computer Corp., the two largest makers of PCs that run Microsoft's Windows operating system, have climbed 25 percent and 21 percent, respectively.
While the S&P 500 has rallied 26 percent since its low on March 11, Microsoft has gained 14 percent.
``People are unclear what the growth outlook is for the coming year'' with Microsoft, said Christian Koch, who helps manage $50 billion at Trusco Capital Management. The software maker is shifting ``from a growth company to a slow-growth company. I don't know where the new equilibrium is for the stock.''
Ballmer's Sale
Microsoft in April said revenue growth in the 12 months beginning in July would slow to between 3.4 percent and 5.9 percent from 13 percent for the current fiscal year. Revenue, which climbed an average of 38 percent annually in the 1990s, has increased less than 15 percent for three straight years.
The company paid a dividend for the first time in March, when holders received 8 cents a share. The payout is a sign the company expects growth to remain slow, Koch said.
Some investors also are concerned by Chief Executive Officer Steve Ballmer's recent sale of $1.44 billion of shares, his first sales in 12 years. Ballmer said last month he's diversifying his assets.
Koch, who said Trusco may sell some of its 6 million Microsoft shares after the company reports earnings for the fiscal year ending June 30, isn't convinced.
``Ballmer's sale of stock was disconcerting in the current environment,'' he said. ``Diversification is just a party line.''
The CEO said in an internal e-mail this month that Microsoft faces ``significant challenges'' including a decline in computer- related spending and the popularity of competing free Linux and OpenOffice programs.
Shares of Fairfield, Connecticut-based General Electric, which makes products ranging from jet engines to television shows, have risen 28 percent in 2003. The company hasn't always been on top, though: A year ago, GE lost its ranking as the No. 1 company to Microsoft.
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