SAN FRANCISCO (MarketWatch) — Microsoft Corp. was downgraded by two brokers Monday morning who cited worries about the slowing PC market as well as the competitive threat posed by tablet computers — many of which do not use the company’s ubiquitous operating system.

FBR Capital Markets and Pacific Crest both removed their buy ratings from Microsoft MSFT, +1.48% on Monday, lowering the stock to the equivalent of neutral.

That follows similar moves by Goldman Sachs and Janney Capital earlier this month.

“Microsoft is resorting to cost cutting, dividends and buybacks. While all three are encouraging, Microsoft needs a compelling growth strategy and a clearer consumer strategy, in our view, to reignite [the stock] and produce outperformance,” Brendan Barnicle of Pacific Crest wrote in a note to clients.

Shares of Microsoft were trading down 0.5% at $25.24 on Monday morning. The stock has fallen about 17% so far this year.

Both brokers cited concerns about the slowing PC cycle, which could affect demand for the company’s Windows 7 operating system. Barnicle noted, however, that the company’s revenue “generally lags the PC build by six weeks,” so there could still be potential for upside in the company’s up-coming earnings report.

Microsoft is slated to report results for the first fiscal quarter on Thursday after the closing bell. Wall Street expects the company to report a 22% gain in revenue with earnings-per-share jumping by 38% to 55 cents. Read full preview of Microsoft's earnings report.

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A bigger concern for analysts is the company’s long-term outlook as the computing market goes mobile. The sharp growth of smartphones and tablet devices has put a question mark over Microsoft’s storied Windows business, as most of these devices are using mobile platforms developed by rivals such as Apple AAPL, +1.50% , Google GOOG, +0.01% and Research In Motion RIMM .

David Hilal of FBR said the growth of tablet devices like the iPad — which are beginning to show traction in the corporate market — is likely to end up being a “net negative” for Microsoft.

“Third, gone are the days when Microsoft could be late to the market, but, through immense resources, catch up and be relevant,” Hilal wrote. “The vendors it is catching up to today are much stronger, and the adoption curves are much greater, thereby exacerbating the problem of being late to market.”

In her downgrade earlier this month, Sarah Friar of Goldman Sachs said investor sentiment on Microsoft is “unlikely to improve until the company gains a firmer foothold in the growing migration to mobile devices — both smartphones and tablets.”

Microsoft shares currently trade around 10-11 times estimated earnings for the next four quarters. This is nearly the lowest valuation in a decade and 20% below the average multiple for the S&P 500’s information technology sector, according to data from FactSet Research.