Microsoft = Big, Mean, Illegal Monopoly? (Fool Plate Special) November 8, 1999

An Investment Opinion

Microsoft = Big, Mean, Illegal Monopoly?

By Brian Graney (TMF Panic)
November 8, 1999

Software giant Microsoft (Nasdaq: MSFT) saw its shares dip a few percentage points this morning after U.S. District Judge Thomas Penfield Jackson issued his "findings of fact" in the government's ongoing antitrust case against the Seattle wealth-creation machine. Calling Judge Jackson's findings a "legal brief" would be an oxymoron, but interested readers with enough spare time on their hands to slog through the legalese will find a link to the findings at the bottom of this page.

For the most part, the findings suggest that Judge Jackson's legal nose is pointed toward the conclusion that Microsoft has acted in an anti-competitive (read: illegal) nature in the PC operating systems space. While laying out the facts, Jackson does not come right out and say "Microsoft = Big, Mean, Illegal Monopoly." But the parameters of the equation appear to be firmly established in his mind, considering the judge managed to use the term "monopoly power" in reference to Microsoft more than two dozen times throughout his findings of fact.

Calling Microsoft a monopoly is a little like calling Mike Tyson a stupid bully -- everybody knows the truth, but nobody feels the need to state the obvious, especially in a face-to-face confrontation. More importantly, the statement has lost a great deal of its relevancy as the trial has dragged on and scores of pundits have talked the issue to death. At this point, the Microsoft monopoly soap box is so over-used and decrepit that the only further opinion-spouters it could possibly support would be Casper the Friendly Ghost or the near-weightless Ally McBeal. (No strangers to the soapbox ourselves, links to various Foolish opinions on the Microsoft case can also be found at the bottom of this page.)

The question of whether Microsoft acted illegally and abused its monopoly power will be addressed in Judge Jackson's ultimate decision on the case, which itself is expected to monopolize the newstands at some point before the end of the year. The ruling, not the facts of the case, appear to be what investors care about the most at present.

Microsoft investors struggling with the issue of how to interpret this weekend's news can take strange comfort in the general reaction of the Wall Street analyst community, which amounted to a big, collective yawn this morning. Most sell-siders reiterated positive ratings on Microsoft, with only Volpe, Brown Whelan taking a stand and downgrading the company. Of course, the downgrade was only from "strong buy" to "buy," which hardly qualifies as a gutsy call.

For investors, the "invest-ability" issue is the only issue that matters today, although it garners the least amount of attention in the hype-obsessed -- rather than return-obsessed -- media. Judge Jackson has given investors a slug of incremental news to digest, but he has done very little to alter the overall Microsoft investing thesis. The company's financial position has not changed, its market share is as dominant as ever, and its competitive business advantages have not been taken behind the woodshed and whupped. Amid all of the noise from this weekend, a fellow Fool's advice on the issue of Microsoft from 1997 has retained the most relevancy: "Investors are cautioned not to make decisions based on this one event."

Related links:
U.S. vs. Microsoft -- Court's Findings of Fact
Foolish Feature -- Microsoft vs. DOJ, 06/24/98
Microsoft Message Board