Microsoft: The Uncertain Leader of High Tech
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The US government should understand the concept of "monopoly"; after all, it is the biggest one in the world. Even the richest company in the world cannot defeat the awesome power of the US federal government.
As expected, the US government unleashed its power against Microsoft (MSFT) yesterday, ruling that -- surprise, surprise -- Microsoft is a monopoly in operating systems software. What's more, Microsoft attempted to monopolize the Web browser market.
Investors, of course, sensed danger, as Microsoft's stock price plunged a stunning 14 percent, eliminating about $80 billion in its market cap.
The severe damage to the stock price may have ended. But the big question is: Where does the stock go from here? Will it continue to be a high flier? I think the answer is no.
Next, the federal government will exact penalties against Microsoft. The extent is too hard to gauge. However, it is going to involve some pain.
Moreover, Microsoft's ability to leverage its prized asset -- the operating system -- is hampered. This has always been the unbeatable weapon for Microsoft. No more.
Interestingly enough, the adverse federal court rulings will unleash a flood of litigation -- from the states and private plaintiffs (perhaps AOL). Think of it as the modern-day version of asbestos litigation. The litigation is time consuming and the liability exposure indeterminate, but nonetheless expansive.
In fact, the litigation with the federal government will probably last several more years. So Microsoft will continue to live under dark cloud of uncertainty. Already, Microsoft is starting to lose its edge. For example, it is not the MS operating system that dominates the digital handheld market, it is Palm's.
In a sense, the US government is Microsoft's main competitor. So far, the government has won every time. Look at AT&T and IBM. Both companies were mired in costly antitrust litigation that sapped the companies for many years. Unfortunately for shareholders, it seems to be happening to Microsoft.
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