Market Misses Point About Microsoft Ruling

You would think an antitrust ruling against one of high-tech’s long-standing impediments to innovation and consumer choice would send the Nasdaq soaring.

After all, dozens of companies on the ticker compete with Microsoft in any number of PC and Internet software markets. And while I’ve long believed that Microsoft was spreading itself too thin to dominate the growing number of markets in which it competes, the software giant continues to cast a long and ominous shadow on the tech sector. Thus I would expect a court decision against the Redmond Bully to be liberating, a tonic for an ailing market.

Instead, the Nasdaq plummeted 7.6 percent Monday in anticipation of the federal judgment against Microsoft, the fifth-worst one-day drop in the exchange’s history. And things weren’t much better the morning after Judge Thomas Jackson ruled that Microsoft had violated anti-trust laws. By 11:30 Tuesday morning, the Nasdaq was down another 3.6 percent (though by early afternoon it had become climbing back).

Some people argue that Microsoft is no longer a threat to extend its domination of computer operating systems to the Internet. They cite the change in the Net’s competitive landscape in the past two years or so, as companies such as RealNetworks (RNWK) have grabbed leading shares of markets that Microsoft has invaded.

But the Microsoft threat alone is enough to damage the stock price of a competitor. Late last December, shares of RealNetworks fell 13 percent in one day after rumors spread through online stock message boards that Yahoo (YHOO) would quit using the company’s streaming video and audio software on its Broadcast site in lieu of Microsoft’s Windows Media.

While the rumors turned out not to be true, it took RNWK more than two weeks to climb back to its previous level. Hardly a disaster, but multiply the Microsoft effect many times over a year and a lot of investors are affected.

Did Microsoft violate antitrust laws? That’s what the judge concludes, and I tend to agree, though like most people I have an instinctive dislike for heavy-handed government intervention into private commerce and wish the settlement talks had succeeded.

Naturally, there will be an appeal, and Microsoft could emerge relatively intact. There even could be a settlement. Still, Monday’s ruling should send a message of hope to Microsoft competitors and their stockholders. Of course, maybe the message is hard to hear during a freefall.

Subscribe to’s HotWatch, a monthly e-mail newsletter
featuring Internet Stock Report’s top 10 noteworthy Internet stocks for the
month. Each month you will receive in-depth analysis on the top 10 Internet
stocks to watch with the information you need to assess the fast-paced
nature of Internet stocks. Staying on top of market changes in the Internet
market is what counts. You receive 12 timely issues sent to
you by e-mail. Don’t wait, our next issue will be out before you know it
with a whole new perspective on the market. Sign up today at: e-newsletters

News Around the Web