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

To: Bindusagar Reddy who wrote (33927)	11/14/1999 11:41:00 AM
From: Mick Mørmøny	Respond to of 74651

Reality check: Bill Gates has an ace up in his sleeves, whatever is the message behind the MSFT case. Microsoft knows it's time for change By Peter D. Henig Redherring.com November 12, 1999 As a betting man, I'd put more than even money on the hunch that Microsoft (Nasdaq: MSFT) knew the judge was going to issue a finding of fact against the company. It's not that Bill Gates could bully an opinion out of a U.S. District Court Judge ahead of time, but rather that the Microsoft legal team expected to take it on the chin when the finding of fact was issued. The real question is: does it matter any more? Microsoft is already well on its way to adjusting to changes in the software industry. Just a few months ago, Microsoft President Steve Ballmer said, "Literally, if you go out seven to ten years from now, not only our business but every software business will have to remake itself into what I call a 'software service company.'" Just as the Department of Justice was hammering away at Microsoft for controlling the desktop, everyone, including Microsoft Chairman and CEO Bill Gates, realized that the desktop could be a thing of the past. And it's not just passing threats from Linux or further inroads by Sun Microsystems (Nasdaq: SUNW) or even tempting alternative gizmos from companies such as Apple Computer (Nasdaq: AAPL) that are giving Microsoft this reality check. It's the massive explosion of the Internet that's causing everyone in the market to pause and think -- particularly Mr. Gates. In fact, if the obvious assumption is that no single player can have monopolistic control over the Web the way that Microsoft had control over the desktop, then what's a poor billionaire to do? The easy answer is take your war chest and play in a few new sandboxes, and that's what Mr. Gates is doing. Although it's admirable and significant that U.S. District Judge Thomas Penfield Jackson declared that Microsoft used its monopoly power to squelch competition, it's a decision that's nearly outdated for a technology market moving far faster than the legal process. REDMOND REBORN If anything, Judge Jackson's finding of fact was a bump in the road. A bump that, interestingly enough, came at the same time as the Redmond, Washington-based software giant has spent wildly in telecommunications -- including wireless, satellite, and cable -- and is, as Mr. Ballmer said, transforming itself into a services company. The company is even selling or spinning off some of its Microsoft Network (MSN) assets. That we don't necessarily know what type of enterprise Microsoft is piecing together for the future doesn't matter; it obviously has a plan in mind, and it wasn't going to wait around for a legal decision to be handed down before it started to execute. In attempting to become the ultimate applications service provider (ASP) to the free world, Microsoft has said it expects to continue investing aggressively in the telecom and cable industries as a means of expanding its market for software and services -- perhaps in much the same way that Time Warner (NYSE: TWX) not only makes and owns entertainment content, but also distributes that content through its own pipes. Microsoft already has made about $7.9 billion in phone and cable investments in the past two years and still has $18 billion in cash. The company has many parts of the technology pie: it's an Internet investor with a stake in CMGI (Nasdaq: CMGI) and a broadband player with a hand in digital subscriber line (DSL) provider Northpoint Communications (Nasdaq: NPNT). The company has played so many angles that it makes it hard to see how it could ever take a direct hit, even from the likes of the U.S. government. THE TRUTH WILL OUT "I still believe that the American legal system at the end of the day will recognize that Microsoft's innovations and behavior were completely fair and brought tremendous benefits to millions of consumers," Mr. Gates recently said at a shareholders' meeting. Actions speak louder than words, however. The fact that Microsoft is quickly becoming one of the largest investors in telecommunications around the world, while shifting its entire business model away from shrink-wrapped software and toward services, speaks volumes as to how much more market domination Mr. Softie felt it could wring out of Windows. Interestingly, the stock market barely blinked at the decision. As the Nasdaq Composite Index rolls onto record highs, has Microsoft been in any way left in the dust? Microsoft is going to continue to be a good investment. Not because the company excels at "innovation," as its founder would have us believe -- rather because it sees where the technology market is heading and has the cash and the gumption to take itself there first. No ruling is ever going to change that. redherring.com