You Just Know the Government Is Going to Melt Mister Softee
By James J. Cramer
2/15/99 12:17 AM ET
Microsoft's (MSFT:Nasdaq) going to lose. You can feel the rumbles. You know it is just a matter of time. The government did a better job than Mister Softee. Oh, let's just call it like it is; 'Soft blew it. 'Soft should have won. The moment America Online (AOL:NYSE) merged with Netscape (NSCP:Nasdaq), the case should have been over.
But Microsoft's counsel was inept. Ever since Microsoft's turn came it has been all down hill. The boys from Redmond may know software, but they sure figured wrong about the government.
As someone who took Alan Dershowitz's criminal procedure class, I learned early on: The government is all-powerful, can spend any amount of money, and invariably gets its man.
This particular legal team put together by Joel Klein is probably the finest ever assembled by the government. It is as of the '27 Yanks were reborn as a law firm. Murderer's Row. Which is why I find it so amusing that people actually think this team is going to break up Microsoft, something that would benefit the shareholders. The government doesn't want to reward Microsoft or its shareholders. The government wants to punish them. The government wants to rid Microsoft of its ability to boss around the industry. It wants to melt Mister Softee.
The government wants the operating system to be owned by everybody. A common carrier. Think Greyhound. And Greyhound has never made a lot of money for anybody.
Think about it. What can the government do to ensure that Mister Softee doesn't go back to its old wicked ways? It has to take Windows and make it so that it is owned mutually, by everybody. Then Microsoft can't dominate, and domination is what the government had proved, or more importantly, what the company has failed to disprove.
Why do I still own some 'Soft if I think this? (I own calls and have sold common against it, and remain committed to holding some of the stock as this period plays out.)
First, nobody believes what I am writing except me, for now, and it will take forever for people to think anything but positives will come out of this trial. So during the interim, I intend to make money on the long side from this stock.
Second, without a loss in the case, this is my favorite stock because the fundamentals are so strong.
Lastly, as inept as 'Soft has been, it will appeal and appeal and appeal -- and, in the end, I don't think it will matter that much what the government initially argued for.
But that doesn't mean people won't freak out in the interim. And when the common carrier remedy is sought, there could be some rough sledding for 'Soft. (I will again probably buy the stock during that period.)
What do I think about the government's case? 'Soft, the company, has made me more money than any company, save Intel (INTC:Nasdaq). I want 'Soft to win. But I want the Sixers to win, and I wanted the Eagles to win, and I will root for the Phillies. And, like 'Soft, I've got some bad news: It ain't gonna happen.
Why did Microsoft do such a bad job? Why did Microsoft lose a winnable case? For one simple reason: like Mike Milken, the world's most powerful man in the '80s, the head of Microsoft did not understand what I learned the day I got out of Harvard Law School and saw where the smartest people from my class went: not everyone works for money.
The best of the best, the very smartest guys in the country, work for the government's client, the People of the United States. The Justice Department's team simply bested Microsoft's team.
And now we, the shareholders, must pay for the losses. If you own the stock because you think you are about to get a lot of Baby 'Softs, I think you will be gravely mistaken.
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