Notwithstanding all the posting on the MSFT case, I am posting this article because of a reference to Intel near the lower third of the article. Pls read it...its another slam against the evil empire.
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Microsoft case seen weighing on employees, investors
By Scott Hillis
SEATTLE, April 30 (Reuters) - Microsoft Corp. <MSFT.O> is digging in for a battle against government efforts to split the company, but analysts say the protracted legal fight could discourage two important groups who aren't used to let-downs: investors and employees.
The U.S. Justice Department on Friday called for splitting the world's biggest software company in two to curb what federal Judge Thomas Penfield Jackson has ruled is illegal abuse of its monopoly in the basic software that runs personal computers.
Microsoft and its chairman, Bill Gates, have vowed to fight the ruling and have amassed enormous resources to do so, but they must also tend to internal discontent.
"The biggest challenge that company has is not in Judge Jackson's courtroom," said Gary Beach, group publisher of CIO Magazine for corporate technology officers.
"When Bill Gates is asked about the secret of Microsoft's success, he'll always say it's great people and hiring great people," Beach said.
"If you're a college student graduating next month, do you want to go work for a branded monopolist? Their hiring power is eroding because fewer smart people would choose to spend their careers at a company whose future is in doubt," he said.
Microsoft has long held tremendous draw for young programmers and engineers, but the legal worries are also cast against a backdrop of a recent high-level defections -- including former chief financial officer Greg Maffei.
Many inside the company must be wondering if the shiniest brass ring -- Microsoft's high-flying stock that has turned as many as one-third of its 33,000 employees into millionaires -- will be forever out of reach.
Those concerns seem to be weighing on investors as well.
Uncertainty over whether Microsoft will be one company or two and if such an operation would cure the disease but kill the patient, have hammered its stock price by about 40 percent since it reached a high of 119-15/16 in February.
In a morale-boosting move last week, Microsoft Chief Executive Steve Ballmer announced that all employees would be granted new stock options equal to all other options they received in the past year.
Saying he wanted to "preempt" any worries employees might have about their own financial futures, Ballmer said the new options would be priced near the stock's 52-week low.
The move as seen as an effort to counter employee defections and discontent.
"There is absolutely no doubt that the executives and employees at Microsoft will be thinking about what is happening in the courts," said Daniel Kusnetzky, vice president of system software research for International Data Corp., a technology research firm.
"While it may not hamper their decision-making, it will take some of their energy away from just building good products and beating their competition," Kusnetzky said.
Meanwhile, the company is girding for all-out war with the government.
As soon as the Justice Department issued its break-up proposal, Microsoft executives angrily denounced it as extreme and unwarranted, and said such a move faced certain defeat in the appeals process.
The company now has until May 10 to file its rebuttal to the government's breakup proposal. Justice then has a week to respond, before a May 24 court hearing. An appeal of the antitrust verdict is expected to drag the case out for a year or more.
Deep-pocketed Microsoft is certain to have its legal eagles working in overdrive to avoid a breakup, which Gates said would be bad for the industry, shareholders and the U.S. economy.
The company also points to a long line of customers for new products like its Windows 2000 business operating system. And it is building up expectations for a soon-to-be-unveiled project called Next Generation Windows Services that aims to tap the Internet.
Such bravado aside, many believe Microsoft will waste valuable resources fighting an uphill battle.
Analysts are divided over whether Microsoft will evenutally win, but many are questioning what price the company will pay in the meantime.
"This (breakup proposal) is probably almost the best-case sceneario for Microsoft. It could be a lot worse than this and if they continue to fight the break-up it is likely to get a lot worse," said Rob Enderle, an analyst with technology research firm Giga Information Group.
Kusnetzky added that Microsoft might do well by its investors if it started to beef up its product line to include software that runs on rival operating systems such as Linux, or on machines with non-Intel Corp. <INTC.O> microchips.
"If they believe that they're going to win the good fight, they'll go doing what they want to do. If they are prudent, they'll start developing for other platforms just to make sure that if they are broken up, they can hit the ground running," Kusnetzky said.
"You should dig the well before you're thirsty," he said.
15:32 04-30-00
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