>DELLINGER: The risk, the legal risk, not just antitrust but legal, has not been fully
>appreciated, and it has not been discounted in
>the multiple evaluation of the stock.
Sorry, but I have to side with Regimond (or at least what I THINK Regiond would say) on this one.
The stock price right now is $20 or so off its high -- that's a loss of $20 billion or so in market cap (if my memory serves as to how many shares are outstanding). While it's overvalued for a lot of reasons, I do not feel the DOJ's present legal action is one of them.
That's not to say the situation can't change, but, right now, I think the "legal risk" from DOJ is minimal.
Here's how I see it:
There is, of course, the possibility Microsoft might actually win this thing. You can go read Neukom's brief ( microsoft.com ) and decide for yourselves what you think of this preview of their arguments. I think the arguments merit assigning a probability of, say, 40 to 50 percent to the likelihood Microsoft might win. A victory for Microsoft would be VERY positve for them in a number of ways.
But let's take a best (or worst) case scenario: Suppose DOJ can prove that the parties specifically agreed that IE and Windows 95 would be treated as two separate products under the Decree. (Disclaimer: I have NO knowledge or reason to believe this is true. It's just that this would, for me, present the most clear, easiest case to prove if it were true.)
On the horizon, we have a new OS "successor to Chicago" product, to which the Consent Decree, but NOT the DOJ Petition as presently configured, applies. The DOJ petition seeks no relief at all with respect to Windows 98. Maybe I'm wrong, but I suspect they know they will not get very far if they try to argue that Windows 98 is anything other than a single product or an integrated product within the meaning of the Decree.
Windows 98 is due out in April 1998.
Now, Microsoft says it wants an evidentiary hearing preceeded by, in Neukom's words, "weeks and months" of discovery and motion practice. Let's say that, after the DOJ responds on November 20 and the hearing on their present filings takes place in early December, the judge gives them, oh, 60 days to do discovery (not a very long time when compared with your average civil lawsuit where discovery might stretch for 180 days or longer), and, say, another 30 days to file their opening briefs in connection with the "motion practice" Neukom wants to do. Then, if each side files one motion, and the court gives them another thirty days of briefing (for oppositons, replies and supplemental briefing), a hearing would probably not take place much before April. If the judge decides the matters quickly and there are no further issues, we could conceivably get a definitive ruling by May 1.
Assuming DOJ wins and that Windows 98 ships May 1, DOJ will have secured this great victory just in time for the issue to become moot.
But let's be super-optimistic. Let's say I'm wrong, Neukom does not get to do his discovery and motion practice, the judge is faster, and Windows 98 ships later. Let's say that the DOJ gets a knock-out ruling in December that Microsoft violated the Decree and that Windows 98 gets pushed back to, say, June. At $1 million a day, the fine would come to about $180 million, assuming DOJ gets the fine it is asking for and Microsoft does not stop its licensing practices. The actual period between the date Microsoft gets hit with the injunction and the date Windows 98 ships would be about 180 days.
All these risks and the legal work for, at most, about 6 months worth of effective injunctive relief. And it's not at all clear what the injunction would accomplish, since it is not clear the OEMs and resellers would not ship IE anyway (I'm leaving aside the effects of how a victory by DOJ might be perceived).
While I would like to see the DOJ enforce the Decree and the antitrust laws, and with all due respect to their fine lawyers, the risk to reward ratio in bringing this case at this time does not add up for me. Maybe I'm missing something, but I'm having a hard time understanding why DOJ is doing this.
Maybe someone can explain it to me. |
