Al....
This article sums up MSFT potential post decision, for me it is a buy on dip...
Jackson set to judge, but Microsoft's not at risk
By Lawrence Aragon
Redherring.com, March 27, 2000
Who would win the Oscar for "best sound-effects editing" had more drama than the culmination of the U.S. government's antitrust suit against Microsoft (Nasdaq: MSFT). Sure, we'll all tune in Tuesday to see how Judge Thomas Penfield Jackson rules against the world's largest software maker, but we all know that it doesn't make any difference -- not at this point.
Even if Judge Jackson comes down hard against Microsoft -- which many expect him to do -- the company will simply appeal the judgment and drag it out for a few more years, making the stakes in the case even more irrelevant than they are now. If the Department of Justice (DOJ) had brought the suit in the midst of the browser wars back in 1996, it may have changed the technology landscape. Maybe Netscape wouldn't be a unit in America Online (NYSE: AOL).
But the fact is, the tech business has undergone dramatic changes since U.S. vs. Microsoft was filed. The Windows platform has given way to IP. The battle over the desktop has taken a back seat to the struggle for leadership in markets such as wireless handheld devices, business-to-business electronic commerce, and broadband services. Every week, it seems, a new multibillion-dollar market emerges, and Microsoft has to duke it out with dozens of capable software, hardware, and services companies.
Does this mean Microsoft is old hat? A colleague of mine argues that the government's case against Microsoft slowed the company down. Had the case not been brought, Microsoft might have dominated the Internet, he suggests.
SMOKE SCREEN
I don't buy it. No one can -- or ever will -- own the Internet. It's like suggesting that NASA could own space. As for Microsoft slowing down, I'm not convinced of that, either. What I am convinced of is that the company wants you to believe that it has slowed down, that it's not the threat that it once was. It's a smoke screen. Bill Gates may have stepped back into the chairman's seat, but his successor, Steve Ballmer, is just as hell-bent on winning as Mr. Gates. I think Mr. Ballmer has been laying low -- a very difficult task for someone so passionate and opinionated. Once a formal judgment has been passed on Microsoft, I expect he'll come out with both barrels blazing.
I may be wrong, but if I am, so is Wall Street. Since the DOJ filed suit in May 1998, Microsoft's share price (adjusted for splits) has more than doubled, closing at $111.69 on March 24.
Cisco (Nasdaq: CSCO) may have eclipsed Microsoft as the market capitalization leader, but the Redmond juggernaut still has a market cap of $581.3 billion. That exceeds the caps of IBM (NYSE: IBM), Sun Microsystems (Nasdaq: SUNW), and Yahoo (Nasdaq: YHOO) combined. Heck, you could even throw in Amazon.com (Nasdaq: AMZN), eBay (Nasdaq: EBAY), and Commerce One (Nasdaq: CMRC) and have $16 billion left over.
And it isn't as if Microsoft has been standing still during the DOJ battle. Since the suit was filed, it has branched into a multitude of new markets, with 63 investments and 14 buyouts.
RINGING UP DEALS
It may be labeled as an operating systems company, but Microsoft quietly has become a significant force in other huge markets, such as communications infrastructure. It has sunk more than $7 billion into cable, networking, and broadband services companies ($5 billion into AT&T (NYSE: T) alone). Among them: Akamai (Nasdaq: AKAM), Broadband Office, Comcast (NYSE: CCZ), Concentric Network (Nasdaq: CNCX), DSL.net (Nasdaq: DSLN), Jato Communications, Nextel (Nasdaq: NXTL), Qwest Communications (NYSE: Q), Rogers Communications (NYSE: RG), Rhythms Netconnections (Nasdaq: RTHM), Tut Systems (Nasdaq: TUTS), and Winstar (Nasdaq: WCII).
What may have some folks worried is Microsoft's reliance on Windows as a revenue source. Last year, $8.5 billion of its nearly $20 billion in sales came from Windows. Sales of productivity apps totaled $8.8 billion, while consumer and "other" revenues totaled $2.4 billion.
But why worry? Even if Judge Jackson rules that Microsoft should open its source code, it's not going to happen anytime soon. The appeals process would drag on for years, and during that time you'll see Microsoft's reliance on that revenue stream diminish. The PC platform is a replacement market, anyway. You have to believe that Microsoft is looking for more ways to get its software into growth markets, such as communications. Look at its plans for the X-Box gaming console, for instance.
And if it can't make the software or technology it needs to be competitive, it will just buy it. Remember that market cap? That gives it license to buy just about anybody it wants. If you thought that News Corporation (NYSE: NWS)'s alleged plans to make a bid for General Motors (NYSE: GM) was odd, consider what surreal deals Microsoft could make by leveraging its stock price. That's not to mention close to $18 billion in cash.
When you lay out all of Microsoft's options, it's hard to come up with a reason why the company should be worried. That probably explains its half-hearted attempt to settle with the government. It knows it holds all the cards. It may not make for great drama, but in this market, who really needs more excitement? |
