FOOL ON THE HILL
An Investment Opinion
The trees are beginning to take on some leaves, the grass is shaping up, the baseball season has finally started -- what Fool could ask for anything more?
It's been a good time lately for younger 401(k) investors who are methodically adding money to their retirement accounts. People who are net savers right now should be very pleased with the opportunity to put the same amount of cash into the market and receive more for their money than they've been getting recently. Those who own (or owned) shares with an eye toward selling them sometime soon -- they aren't really net savers, and they probably have been less happy about the market's recent action.
I don't wish to be callous about that -- my parents, for instance, are at a stage in their lives where they soon may no longer be net savers. I happen to be at a stage in life where I certainly am, so short-term declines in the market are a good thing from my perspective. In fact, maybe today's steep decline was too short-lived, the Nasdaq rallying almost all the way back from an early 12% thumping. That's about as much as I know about what happened in the market today.
So let's move on to an area where I might be able to shed just a little bit more light than tossing out the standard Foolish cliches about one-day market wackiness. Back to the Microsoft case.
In a previous life, I was a trial lawyer. I worked in both the public and private sectors, so I have a little perspective on both sides in this case. One of the things that stands out most to me in evaluating this case, is that it doesn't appear that anybody who watched the trial thought that then-CEO Bill Gates was particularly honest during his deposition testimony. Let me excerpt the relevant remarks from a column I wrote after the Findings of Fact had been handed down. (Accountability alert: the column was entitled, "Why the Market Loves Judge Jackson" -- which just might not strike everybody as accurate today, but I stand by the original assessment.) On November 11, 1999 I wrote:
"The Economist, no bastion of left-leaning pro-government commentary, referred to Bill Gates' videotaped deposition testimony as "appalling." I read over some of the testimony, and this characterization is spot on. Don't take my word for it, though -- just look at some of the commentary of Slate, which followed the trial from the beginning.
-- "I doubt any sane and reasonable man could come away from today thinking anything but that Microsoft is guilty of many awful things, and if those things aren't strictly illegal they should be. On top of it, he would probably decide that Bill Gates had perjured himself." Slate, Oct. 19, 1998
-- "A similar, and more important, question can be raised about Bill Gates' video testimony, a little of which was also shown this morning. Gates surely seemed, through his manner of speech and body movements, not to have been entirely candid." Slate, Nov. 10, 1998
-- "Until today, I thought the Microsoft lawyers should call Gates anyway, because he couldn't possibly create a worse impression than that left by the snippets of video depositions that Boies and company keep showing at the trial. But then they showed more snippets of Gates' video depositions today, and I realized that there are indeed gradations of badness in Gates' performance.... Watching Gates on the two big black monitors in the courtroom (with a transcript helpfully scrolling just beneath the video image) you just wanted to slap the guy." Slate, Dec. 15, 1998"
These three excerpts come from three different writers, and Slate is published by Microsoft, so I think that it would be hard to argue pro-government bias here. And you know what happened? Everybody involved, the government lawyers and the judge, did just want to slap Gates, and Gates bloody well gave them the chance by not settling the case.
The expected emotional stance of the lawyers during the settlement discussions would have been to cut Microsoft no slack if they shared the same perspective as Slate's reporters. After all, in a case where the government lawyers knew that the judge was similarly angered by Microsoft's deficit of forthrightness regarding its actions, there was little incentive to accept any deal that wouldn't place severe restrictions on Microsoft's operations. Who wants to accept the word of Microsoft execs at this point, if they're unconvinced that those execs can be honest even under oath?
If there's even a grain of accuracy in this speculation, things look mildly more promising for Microsoft the further we move, both in time and distance, from the trial court. Microsoft simply has a better playing field at the appeal level than the trial level on the basis that its executives will no longer be in issue. The appeal will come down to an evaluation of the law, rather than a re-evaluation of the facts, and the law looks to be much better than the facts for Microsoft in this case. An appellate court will also not feel it has been treated with contempt, as it is reasonable to think Judge Jackson must have felt as he was writing his decision.
Further, the more time that elapses, the more the anger and intractability of the government's lawyers might fade, and there could be a greater willingness to accept the enormity of their accomplishments so far without needing to break the company up to satisfy any retribution urge. Time heals all wounds, or so they say. Since there potentially will be a couple more years of litigation if this gets appealed all the way to the Supreme Court, there's a lot of time for emotions to cool, and some common ground to be found.
Of course, for that to happen, Microsoft's executives need to be a bit more circumspect when talking about this case in public. Perhaps there was some need to speak yesterday just to maintain the appearance that everything was not a total loss, but I couldn't help feeling that the public relations campaign continues to be a disaster if any kind of a settlement is to ever develop.