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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: Gerald Walls who wrote (32334)	11/6/1999 4:58:00 PM
From: Ian Davidson	Respond to of 74651

From Barrons...FWIW: Microsoft Loses Round One to the Government, But Will the Final Outcome Be Bad for Investors? By Mark Veverka While legal experts parse the words of U.S. District Court Judge Thomas Penfield Jackson, looking for clues to Microsoft's fate, fund managers are scrambling to figure out how the stock market is going to react to Friday's ruling that the software giant is a monopoly. The early returns from the polls weren't good for Microsoft fans. The Redmond, Washington, software company's shares plunged 2 7/8, to 88 3/4, in after-hours trading immediately after the judge's findings were released. Because the ruling was only a "finding of fact," a partial decision, it didn't spell out what happens next for Microsoft. That might not be known until the judge decides on a remedy in the second stage of the decision, which is expected to come late this year or in 2000. The second stage might never occur at all, of course, if the software giant settles with Uncle Sam before Jackson takes action. Even if the case leads to the breakup of Microsoft, it wouldn't necessarily be bad news for shareholders. While that is apt to be painful to investors in the short term, history shows that those who held stock in monopolies such as Standard Oil and AT&T prospered by staying invested in the entities created by the breakups. Not that it's easy to look beyond the gloom immediately cast by the judge's finding. Antitrust lawyer Daniel Wall, a partner at Latham & Watkins in San Francisco, said that the findings are "clearly favorable to the government and systematically so." That means the judge was persuaded by arguments put forward by the Justice Department. "That has to be worrisome for Microsoft," said Wall, who was a government prosecutor in its antitrust case against AT&T and obviously is a master of understatement. However, Wall pointed out that the ruling, which he had examined cursorily on the Internet, didn't indicate that Microsoft's "organizational structure" was a key to the monopoly the government says the company has over computer operating systems. If it had, that would strongly indicate that Jackson favors a breakup. One thing is relatively clear, Wall said, both sides have a lot less to argue about and their incentives to hammer out a settlement have increased substantially. In comments after the finding was released, Microsoft Chairman Bill Gates expressed his desire to resolve the matter. And Microsoft has said that it would accept some restrictions on its business, if required to do so to reach an agreement. But government officials may not go easy on him. One said that the case required "serious and far-reaching remedies." "It wouldn't surprise me at all that Microsoft and the Justice Department will be sitting down very soon," Wall said. Regardless of what happens, Fred Kobrick, chief executive of the Kobrick Funds, thinks Microsoft shares will suffer in the short term. "I think this ruling will put moderate downward pressure on the stock [Monday], but I think Microsoft is still a long-term winner." If the judge were to call for a divestiture or if Microsoft were to agree to a split in a settlement with the government, Microsoft fans would simply view the decision as a buying opportunity, said Bill Schaff of Bay Isle Corp. in San Francisco, a subadviser for the Berger Information & Technology Fund. "If the Feds force Microsoft to break up, then I would be a buyer in the stock," Schaff declared.