This is not going to be a fun day, nas futures down 110, MSFT down 11%, tho I wonder how ORCL and SUN will do. Here's a MSFT article:
worldlyinvestor.com Wake-Up Call
Not All the Microsoft News Is Bad
By David H. Smith, Columnist
Slowing sales is much bigger trouble than a break-up. Still, look for selling pressure.
I think it was Napoleon Bonaparte who said that real men only need four hours sleep a night. If that's the case, market jitters are making a real man of me -- it was a sleepless Sunday before Microsoft (Nasdaq:MSFT - news) Monday. Microsoft looks like it will be falling hard today, kicking the legs out from under the Nasdaq again.
People stayed late at their desks on the Thursday night before the holiday weekend to see Microsoft's third-quarter results. In the Wall Street game, as it is played in 2000, everyone has to beat estimates by a penny or two in just the same way that all the children in Lake Woebegon are above average. So it was with 'Soft. After a long bull market, it has plenty of investment gains socked away that it can access for the purpose of massaging the results.
Results Don't Really Matter
The Redmond people might have saved themselves the trouble. Non-operating earnings don't count, they don't hide the light revenues, and in any case it is not the results we actually care about. That's history already. This earnings season has already produced a long list of technology companies that saw their shares drop after beating earnings estimates: Intel (Nasdaq:INTC - news), IBM (NYSE:IBM - news), Atmel (Nasdaq:ATML - news), Texas Instruments (NYSE:TXN - news), RF Micro Devices (Nasdaq:RFMD - news), Covad (Nasdaq:COVD Nasdaq), and PurchasePro (Nasdaq:PPRO - news) are just a few of them.
What we care about is the future guidance on the conference call, and that was negative. Not merely conservative, as we have come to expect, but negative, with calls for analysts to trim future estimates to take account of a serious slowdown in the personal computer business.
It was so negative, in fact, that the stock was sold heavily on the Instinet trading system that institutions can access at all hours. Microsoft is a large part of all popular stock indices, so a weak market open seems inevitable. S&P 500 index futures are down 9 points, and Nasdaq 100 index futures down 85.
Three-Way Split Seen
Microsoft news does not end there. There are reports this morning that the Justice Department and state attorneys general that are party to the antitrust suit are likely to press for a break-up of the company into separate operating-system, Internet and application-software units.
I don't see why this is such a disastrous outcome for the company. Instead of being one of the world's most competitive companies, Microsoft would be three of the world's most competitive companies. The Redmond people could have done this on their own initiative long ago, headed off all this antitrust nonsense and looked smart. Instead they have taken their chances with the justice system, losing the early rounds and looking decidedly foolish so far.
And through constant expressions of horror about the possibility of a break-up, they have convinced the investment world that it is a horrifying outcome, rather than a merely inconvenient one that presents a whole new set of opportunities.
Opening Windows to Opportunity
When the market mood is positive, it can take a positive view of trouble with 'Soft. Other things being equal, problems there are of benefit to competitors such as Sun (Nasdaq:SUNW - news), Oracle (Nasdaq:ORCL - news), and the Linux companies. To the extent that the Internet is accessible from other devices beyond the PC, Microsoft's loss is the gain of the makers of those devices, their chipsets and the flash memories that bear their operating systems.
But is the market mood negative? Individual investors with whom I'm in personal contact seem fairly hopeful, looking to buy the dips as ever, convinced that JDS Uniphase (Nasdaq:JDSU - news) is a cheap stock because it is down almost 50% from highs. On the other hand, I know professional investors who, if the words ``toast' and ``suck' were expunged from their vocabularies, would have no words to describe their outlook on the Nasdaq.
Who is right? The happy retail punter beat the dour professional for much of the late 1990s. But in the long run, that is not way to bet. And for today, expect sellers to dominate, and not to practice much discrimination. |
