FRAMINGHAM (04/10/2000) - Analysts expect Microsoft Corp.'s stock to continue to lag as long as the uncertainty of its antitrust case lasts - and perhaps even after the remedy phase is complete.
The stock and the financial markets took a pounding last week even before U.S.
District Court Judge Thomas Penfield Jackson ruled Microsoft had violated the Sherman Antitrust Act.
Rumblings started last Monday after Microsoft and the Department of Justice failed at a last-ditch effort to settle. Microsoft's stock tumbled $15.88 to $90.875 per share - more than 14 percent - and the Nasdaq Stock Market dove 349 points to finish at 4,224 as frantic investors waited for Jackson's ruling.
The drubbing continued Tuesday, as Nasdaq dropped a record 575 points before recovering. Nasdaq rose late in the week, though Microsoft remained below $90 per share.
Microsoft's stock will be on a roller-coaster, hovering around the $80s and $90s as the market digests the ruling and figures out the long-term effects, says Jeffrey Maxick, an analyst at Chicago-based Madison Securities Inc. "It may gain 25 percent and reach the 110 area, but shareholders won't do better than that," he says.
Frederic Dickson, an analyst at Branch Cabell & Co. in Richmond, Virginia, says Wall Street treated Microsoft "very gently" compared with how it sometimes reacts to negative news from other companies. Microsoft suffered a 15 percent to 20 percent drop, but others are often hit with a 25 percent to 40 percent instant correction, Dickson says.
The remedy phase will be key to Microsoft's long-term stock value, but analysts declined to speculate about what the verdict will bring. Most agreed it would behoove Microsoft and the Justice Department to settle so both sides can move on.
But Maxick says he doubts Microsoft will settle. "It would be in Microsoft's interest to settle, but it's a 1,000-pound gorilla, and it's not in them to compromise."