Dec. 5 (Bloomberg) -- Microsoft Corp. may have to warn shareholders that profit and sales will fall short this quarter for the first time since 2000, according to Heather Bellini, an analyst at UBS AG.

Bellini, the top-ranked software analyst by Institutional Investor magazine, said every one of Microsoft’s five divisions may miss the company’s and analysts’ sales forecasts. The world’s biggest software maker won’t be able to cut enough costs to meet profit goals, New York-based Bellini said in an interview.

Microsoft said in October that it was preparing for a recession ranging from “mild” to “deeper” and forecast profit of as low as 51 cents a share and sales of as low as $17.3 billion. With consumers and corporations freezing spending, Bellini now expects the company to earn 48 cents a share on sales of $16.7 billion.

“Enterprises have gone on a buyers’ strike just like consumers have,” said Bellini. “You see the unemployment numbers -- I don’t think people are worrying about upgrading laptops and desktops.”

Bill Cox, a Microsoft spokesman, declined to comment.

Microsoft, based in Redmond, Washington, rose 76 cents to $19.87 as of 4 p.m. New York time on the Nasdaq Stock Market.

Cheaper Software

Intel Corp., whose chips run more than three-quarters of the world’s computers, reduced its fourth-quarter sales forecast by about $1 billion last month, citing “significantly weaker” demand. Dell Inc.’s third-quarter sales trailed analysts’ estimates by more than $1 billion on slowing computer demand.

Shipments of PCs will rise 6.6 percent this quarter, according to Framingham, Massachusetts-based research firm IDC. That’s down from 17 percent in the year-earlier period.

Microsoft also is contending with the popularity of cheaper laptops that run older and less-expensive versions of Windows. Called netbooks, the machines typically cost less than $500 and run the Linux operating system or Windows XP instead of the current Windows Vista. Among the 25 most popular laptops on Amazon.com today, only one, the 18th best seller, runs Vista.

That’s cutting into sales and profit in the Windows division, Bellini said. Microsoft forecast sales of Windows for PCs to rise 7 percent to 10 percent this quarter, the company’s fiscal second period. Bellini projects growth of 3 percent.

In the server software unit, Microsoft forecast growth of at least 16 percent, while Bellini predicts 10 percent.

Avoiding Job Cuts

In contrast to some other technology companies, Microsoft may be avoiding job cuts, Bellini said. That is making it hard to reduce costs quickly enough, she said.

“It takes a long time to take costs out, it’s not easy,” she said.

Hewlett-Packard Co., the world’s biggest PC maker, is cutting 24,600 jobs over the next three years. Adobe Systems Inc., the world’s largest maker of graphics and Web-design software, announced plans this week to cut 600 jobs after forecasting sales that trailed analysts’ estimates.

U.S. companies slashed payrolls last month at the fastest pace in 34 years as the economy headed for its deepest and longest recession since World War II. Employers cut 533,000 jobs, bringing losses so far this year to 1.91 million, the Labor Department said today in Washington.

Shortfall in 2000

Bellini has a “buy” rating on Microsoft and Oracle Corp. shares because they are in a better position than other software companies, she said. Oracle is safer than Microsoft because it gets 50 percent of its sales from recurring contracts, while Microsoft gets 30 percent to 35 percent, she said.

In December 2000, Microsoft warned of sales and profit shortfalls for the first time in a decade. At the time, the company cited a slowing global economy, with particular difficulty in the U.S. The company reduced its forecast after shortfalls at Intel and Dell.

This time, Microsoft has far more companies on multiyear agreements that insulate it more from economic turbulence, Bellini said. Still, the freeze in spending is deeper than in 2000, Bellini said.

“I don’t see how they can eke it out,” she said. “The environment has gotten materially worse since they gave forecasts.”

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

Last Updated: December 5, 2008 16:03 EST