Microsoft has cut sales and earnings guidance for the current quarter, citing the impact of foreign exchange rates. The software giant said in a securities filing on Thursday that it now expects fiscal fourth-quarter sales of between $51.94 billion and $52.74 billion, down from its prior guidance of $52.4 billion to $53.2 billion. The quarter ends June 30. The company’s shares fell 2.6 per cent in early trading to $265.31 down by around 21% year to date with earnings expected to be between $2.24 a share and $2.32 a share, down from prior guidance of $2.28 a share to $2.35 a share. Economic weakness in other parts of the world has helped propel the U.S. dollar to multidecade highs against its trading partners, which comes as U.S. inflation is at or near its highest level in nearly 40 years. The U.S. Dollar Index, which tracks the currency against a basket of others, is up more than 6% so far this year and hit its highest level since 2002 last month. The greenback’s climb has sent the euro, British pound and Japanese yen tumbling according to the Wall Street Journal. Microsoft is the latest multinational company to warn of the stronger dollar’s impact on financials. Salesforce Inc. Earlier this week cited the stronger dollar in lowering its sales outlook for the year. The business-software company doubled the impact that it expects this year from the stronger dollar to $600 million from its $300 million forecasts in March. Microsoft also lowered its gross-margin guidance citing strong dollar margins. The company according to the filling says, “A strong dollar allows Americans to buy goods from other countries at lower prices. But it can also hurt U.S. manufacturers by making products more expensive for foreigners, and it means U.S. businesses receive fewer dollars for their exports.” Microsoft earlier in its April earnings report said that a stronger dollar reduced the software company’s revenue and earnings by $302 million and 3 cents a share. The dollar has largely benefited from its status as a haven for investors during tumultuous financial markets and from the Federal Reserve’s promise to quell inflation by raising rates. Money managers typically buy currencies linked to countries where central banks are raising interest rates to rein in a hot economy. Additionally, Asset managers have also been scooping up the dollar, boosting its value, as a bet on the resilience of the U.S. economy compared with Europe and the U.K where economic data has pointed to low growth. The British pound and the euro both have dropped over 6 per cent so far this year.
