NEW YORK, Nov 07, 1999 (AP Online via COMTEX) -- Branded a monopoly
shortly after the stock market's Friday closing, Microsoft could put a
drag Monday on Wall Street's record-setting rally as investors assess a
judge's blunt antitrust ruling.
In the longer term, even if Microsoft agrees to certain punishments to
settle its legal battle with the Justice Department, the software maker
may eventually emerge as a marked company like the leading tobacco
makers, dogged by state and civil lawsuits aimed at its coffers.
U.S. District Judge Thomas Penfield Jackson was extremely clear-cut in
his findings late Friday, declaring that Microsoft abused its dominance
of the personal computer industry to stifle innovation and competition,
hurting consumers.
But the decision was only a first step toward determining punishment
that likely will affect the entire technology industry. It's not clear
whether investors will confine the initial punishment to Microsoft --
which just a week ago was added to the influential Dow Jones industrial
index -- or lash out at the market's broader technology sector.
Judging from the harsh response Friday in after-hours markets, where
Microsoft's shares slid more than 4 percent from its Nasdaq close of
$91.56 1/4, the ruling will present at least a temporary speed bump for
both the Dow and the Nasdaq Stock Market, which has set record highs
for six sessions in a row.
Coming amid such a powerful rally -- the Dow has risen 7 percent in the
past three weeks while the Nasdaq composite has soared nearly 11
percent in just seven sessions -- the Microsoft ruling could sap the
market's enthusiasm or at least provide a handy excuse to protect some
of the recent gains.
Like any of the 30 stocks that make up the Dow, every point that
Microsoft moves equates to a 4-point swing in the closely watched
market barometer. So Friday evening's 4-to-5 point drop by Microsoft on
after-hours markets may translate into a 15-to-20 point loss for the
Dow when regular Nasdaq trading begins Monday morning.
The market can easily weather such a loss unless the uncertain
ramifications of the ruling undercut demand for technology shares in
general, the main driving force for Nasdaq and the overall stock
market. Either way, it may be hard for Microsoft, a favorite on Wall
Street, to provide the type of leadership and gains investors have come
to expect.
'I would expect to see pressure on Microsoft this week and in weeks to
come, so it may be difficult for the stock to be an outperformer the
way it has in the past,' said Barry Hyman, senior equity analyst at
Ehrenkrantz King Nussbaum, a New York-based investment firm.
But, he added, 'I look at it as more stock specific. I don't think
you're going to see the other technology stocks start to sell off.'
In fact, the prevailing hunger among investors for just about any
Internet-related business may turn Microsoft's loss into a gain for
other technology stocks, said Robert Streed, an investment strategist
for Northern Trust in Chicago who manages the Northern Select Equity
Fund.
'Because people want to own tech stocks, if you're reluctant to buy
Microsoft because of the cloud hanging over the company, (part) of your
technology money could be diverted into other investment ideas,' said
Streed.
'Longer term, I'm concerned about the state attorney generals and the
entrepreneurial bar. They may keep after Microsoft looking for money
for a long time ... bringing class-action lawsuits for all people who
bought Windows,' he said.
Streed noted that a leading target of many smoker damage suits was
Philip Morris Cos., maker of best-selling cigarette brands like
Marlboro.
'If this was some software company on the ropes, you wouldn't bother.
That's why they went after Philip Morris instead of the people who make
Skoal chewing tobacco. That's the entrepreneurial bar, you go after the
deepest pocket,' he said.
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