Microsoft Ruling Should Lift Weight Off Market’s Shoulders

By mid-afternoon Wednesday, we all should know the fate of Microsoft as determined by U.S. District Judge Thomas Penfield Jackson, who has presided over the anti-trust case brought by the Department of Justice.

Even if, as expected, Jackson accepts a DOJ proposal to split the software company into two separate entities, I believe the market will react favorably (though perhaps not immediately), despite investors’ innate distaste for government intervention into private industry.

That’s because the real drag on the market, at least in my opinion, has been the anticipation of anti-trust action, a collective sense of dread that has depressed tech stocks as investors contemplate worst-case scenarios. As one investor put it to me recently, “Who’s going to be next? Cisco? Intel?”

After a nice rally last week, Internet and high-tech stocks stalled Tuesday and early Wednesday, following Monday’s rejection by the DOJ and 19 states of Microsoft’s counter-proposal to the government’s break-up plan.

Granted, it’s hard to pin the market’s movement (or lack of movement) on any one catalyst, but the light trading and mixed results of the past two days seem to reflect the uncertainty many investors feel regarding the case and its effect on the Internet and software industries. And it is uncertainty, perhaps more than anything, that investors hate.

Of course, the case will be far from over, unless Jackson shocks everyone by ruling against the government. If the decision goes against Redmond, which it will, Microsoft will aggressively move into appeal mode, and Jackson likely will stay his order until that process is completed. In the meantime, he could impose conduct restrictions that would go into effect in 90 days.

So while it’s not over ’til it’s over, the judge’s ruling should bring at least some sense of closure and allow investors to begin focusing on the opportunities that could arise for other software companies that have struggled so long against the Redmond giant.

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