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

To: Dwight E. Karlsen who wrote (41014)	4/4/2000 6:39:00 AM
From: puborectalis	Respond to of 74651

Microsoft Should Be Rising Because Settlement Talks Failed: Michael Lewis By Michael Lewis New York, April 3 (Bloomberg) -- Once again, Microsoft Corp. has failed to settle the lawsuit brought against it by the U.S. government. And, once again, the stock market interprets this news as bad for Microsoft. Am I the only one, other than perhaps Microsoft Chairman Bill Gates and Chief Executive Steve Ballmer, who fails to understand the stock market's reading of the news? The decline today in Microsoft shares, by 14 percent, implies that the market believes that a) Microsoft intended to settle the lawsuit and b) any settlement would benefit Microsoft. But just a few months ago Judge Thomas Penfield Jackson issued an extraordinary finding of fact in which he explained that Microsoft was not merely a monopoly but a monopoly that abused its power. We are well past the time when Microsoft can hoodwink government negotiators into another meaningless settlement. Any new settlement must address Judge Jackson's finding of fact, which is to say that it must undermine Microsoft's monopoly. If the government does not insist on breaking up the company, it must at the very least demand changes sufficiently radical to shift the balance of power in the software industry away from Microsoft and toward its rivals. And that change would mean, very simply, lower profits for Microsoft. Much lower profits. Cost-Benefit Analysis Of course, there are antitrust cases where the costs of litigation exceed the benefits. This isn't one of them. The price Microsoft pays to litigate -- in legal fees and bad publicity -- are a rounding error next to the profits it reaps from its monopoly in computer operating systems. Thus, the most cost-efficient strategy for Microsoft to adopt is to stall for as long as possible. If it must cede its monopoly profits, better to cede them later rather than sooner. Apparently, the people who run Microsoft understand this fact. That they do should cause their shareholders to shout with glee, and to buy more shares. The more you think of it, the odder it is that Microsoft shareholders appear to want a quick settlement. Time in this case is Microsoft's best friend; and anything that Gates and Ballmer can do to buy more time should only increase the value of the company. In time, for instance, there will be a new president in the White House. None of the presidential candidates have taken a firm stand on the Microsoft case, though Texas Governor George W. Bush, the Republican hopeful, said he opposes breaking up the company. Gaining Power Sooner or later, a new president will have to decide whether to continue with the lawsuit or to abandon it. And there is at least a chance -- a good chance, if the new president is a Republican -- that he'll tell his attorney general to take a dive. The other benefit conferred by time upon Microsoft is market power. In the few years since the government brought its lawsuit, Microsoft put Netscape Communications Corp. out of business (it was bought by America Online Inc. last March) and acquired a new monopoly in Internet browsers. Granted a few more years of monopoly profits, the company will no doubt use its market position with browsers and its unlimited budget to gain a better purchase on the Internet. (If Microsoft can hold out for a few more years, I wouldn't want to be Yahoo! Inc.) It is always possible that Microsoft will find some non- economic reason to settle. Perhaps Bill Gates and Steve Ballmer will suffer some crisis of conscience. Perhaps they will decide that what is good for Microsoft is no longer good for America. If they do, it will be a disaster for their shareholders.

To: Dwight E. Karlsen who wrote (41014)	4/4/2000 7:39:00 AM
From: John F. Dowd	Read Replies (1) \| Respond to of 74651

Dwight: That response to you was bogus as it comes from one of the biggest MSFT haters in the media-Bloomberg. JFD