If you want to be really bearish on MSFT, you could look to Philip Morris as a guide to what can happen.
While there are significant differences between the Big Tobacco situation and MSFT, you would be surprised at the number of similarities.
If MSFT loses badly, you could see the same kind of nightmare lawsuit quagmire that tobacco companies find themselves in. First the DOJ will get their licks in - putting in penalties, restrictions etc. like MO, like MSFT. Then the accumulated greed and feeding frenzy at the state level, already states are lining up like vultures - like MO, like MSFT. Then class action and even individual lawsuits, some already have been filed ("I had Windows foisted on me, blah, blah, blah" "refunds" - first they are dismissed, then they start winning,), like MO, like MSFT. Legal proceedings in other countries (not only EU, but individual European countries and Japan are looking at MSFT), like MO, like MSFT. When there is blood in the water, after MSFT loses to the DOJ, the feeding frenzy will bring out every shark and opportunist - and you'll see how a vulnerable giant can be savaged.
You may say - that will never happen, we have laws etc. Don't be so sure. We've had "surgeon general" warnings on cig packs for 35 years and yet you get juries award smokers awards that defy common sense and devalue individual responsibility. "But big tobacco has compromising papers which show illegal intent". Guess what - the DOJ is doing a great job of finding the same kind of compromising papers (or in the case of high-tech MSFT, e-mails). And don't take refuge in thinking big tobacco has the public opinion against it. The PR war waged against MSFT has been very effective. More and more "common people", not just industry insiders or competitors see MSFT as the evil empire. The longer this goes on, the more damage will be done.
And you cannot take refuge in the idea that MSFT is soooo profitable etc., that investors will overlook the liabilities. MO once upon a time, was the bluest of blue chips. Tremendous returns for investors. As good if not better staying power than MSFT's monopoly - selling an extremely addictive drug, that at least 25% of the population finds impossible to resist - with worldwide markets. And with beer, food and other businesses, a well diversified company. MO's business fundamentals have not worsened - one could even argue that nicotine is harder to kick than Windows 9x <ggg>.
And yet, the tremendous liabilities, liabilities that are virtually unlimited in a practical sense, overwhelm MO's strong business value (with RN, investors actually value the tobacco part of their business not just as zero, but as NEGATIVE - in other words, you could get the whole company for the price of it's nontobacco parts, and at a discount to boot). Look at the chart of MO - they have gone NOWHERE for a long time now.
You may think this scenario far-fetched. But the way tobacco has been dragged through a nightmare lasting years, and years, and years is a very real possibility for MSFT. Years of litigation, never ending. And don't fool yourself that somehow MSFT can lobby it's way out of this. If anything, the tobacco lobby is one of the strongest ever, plus they have a natural constituency with tobacco farmers, senators from certain states etc. MSFT can't match those advantages.
And MSFT is in an industry where you need to be on your toes at all times, or you can face extinction. MO is not in that situation. Thus, MSFT can not afford to be distracted by years of legal battles, which MO can handle.
My point is not that MSFT will *necessarily* share the same fate. Rather, I want to point out just how serious the situation is for MSFT. This trial is a great danger to MSFT. And MSFT's reaction has not been reassuring. First they underestimated the danger. Then they mounted a catastrophically incompetent defense.
If the day comes, that big institutions abandon MSFT stock, the same way they abandoned MO (sure there are always some who remain loyal) - you will see MSFT price flounder very, very badly.
The trial is a tremendous negative for MSFT. The longer it goes, the worse it will get (that's why looking to last year's appreciation in the face of the DOJ, is misguided). The day may come, when suddenly the street loses faith in MSFT. And that would be devastating to MSFT shareprice, especially that its p/e is rather lofty.
Bottom line - I believe the trial is a very strong factor in MSFT current price, and will continue to be a stronger and stronger factor the longer it goes on. I disagree vehemently with those who dismiss the impact of the trial on MSFT's shareprice.
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