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Technology Stocks : How high will Microsoft fly?

MSFT 492.01

+1.3%

Nov 28 9:30 AM EST

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To: limtex who wrote (16072)	2/15/1999 7:08:00 PM
From: t2	Read Replies (2) of 74651

Here is my brief assessment of RTR's article on Remedies for MSFT. dailynews.yahoo.com (Para 3 and 4 have been added) I have reproduced parts of the story below: WASHINGTON (Reuters) - The U.S. Justice Department and representatives of 19 states are pondering possible remedies if they win their antitrust case against Microsoft Corp. (Nasdaq:MSFT - news) -- from breaking up the company to ordering it to cease violating the law, sources said Monday. Cease violating the law sounds like a reasonable solution if they lose, punishment fitting the "crime". The Washington Post said in Monday's editions that several possible sanctions were under consideration but no decisions had been made. People close to the case said that was true and outlined what those possible solutions were. Now that might make the judge upset(and potential appeals court judges); Getting to remedies even before getting a win from Jackson. MSFT's chances have just gone up at trial and appeals level. A Justice Department official reacted strongly to the report, saying: ''The trial is ongoing. Speculation about what the department might do if the court rules in our favor is premature and inappropriate.'' Microsoft spokesman Jim Cullinan said it was ''clear from comments both in and outside the courtroom that the government is interested in getting involved in the design of software.'' He said a U.S. Court of Appeals decision last year in Microsoft's favor and against the government showed ''that is not in the interest of consumers.'' Another blunder by the government--counting your chickens before they hatch. This is the kind of thing that causes people's feeling to change---just look at Clinton and how popular he got. Don't mean to compare, but i see it happening. The political leaders won't have the will to allow such action. Not in the interest of consumers is the key as well. But Microsoft says that much of what people see in the courtroom is little more than theatrics and that its case is stronger than some observers believe. General counsel William Neukom has said repeatedly that the government has failed to attack most of the assertions its witnesses made in direct written testimony, which is the bulk of its case. Further, company officials say those assertions are backed up with documentary evidence. Experts say if that is so then the company could be in a strong position at either the trial or appellate court level. This is not a case where someone is charged with a high crime and people reactions on the witness stand really don't matter. The written testimony backed up by the appeals court (wrt Windows95) is more important---Obviously. Just doesn't get much media coverage. If Jackson ignores the written testimony and focusses mostly on witnesses, he is going to look stupid in the eyes of the appeals court judges. Prosecutors could seek a one-time structural change or take a regulatory approach. Justice Department Antitrust Division chief Joel Klein has in the past expressed a preference for one-time solutions that avoid continuing oversight and keep the government out of decisions better made by the market in the country's fast-moving high-tech industries. Joel Klein should drop the case if he feels that the market is better at making decisions. If he feels that way--don't expect him to recommend a breakup or licensing of windows. Expect him to favor a fine and some concessions from MSFT. One structural approach would break the company into several identical ''Baby Bills,'' each with complete copies of Microsoft's intellectual property. That approach has been endorsed by former Judge Robert Bork, an antitrust expert who advocates breaking the company into three pieces. Bork works for Netscape as a lobbyist. Larry Ellison favored the same approach. It is obvious that competitors are interested in this type of solution. It would become apparent to everyone that it is not a solution---will take forever in the courts and won't stand. If MSFT was to break up, I bet the court would favor a reasonable method such as O/S and Applications--that too would be a long process the government will lose. The government could take a more regulatory approach by requiring Microsoft to license its secret ''source code'' to competitors. That solution was less than fully successful when the Federal Trade Commission forced Xerox Corp. (NYSE:XRX - news) to license its copier patents in 1975, and opens the door to contentious arguments over the conditions and costs of licensing. Not a good solution. The weakest regulatory approach would be for the judge to order the company to cease business practices the government contends are illegal. The government reached an agreement with Microsoft in 1995 to prohibit certain business practices, but lost an important round in the appellate court when it tried to enforce that agreement in 1997. That is the answer folks. It is the only one that will stick in all levels of court. It is one that both parties can agree upon and not fight it out in the appeals courts--a solution similiar to Windows95. Remember the DOJ lost.

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