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2HRS2GO: Microsoft investors tremble at annual meeting

The sound of an alarm siren summed up the sentiment among Microsoft (Nasdaq: MSFT) investors better than anything else at this morning's annual meeting.

You'd normally expect waves of satisfaction at the shareholder gathering of a company whose market value has risen 58 percent over the past year, but the Microsoft crowd was in circle-the-wagons mode. Institutional holders of MSFT stock probably aren't too worried about the antitrust case yet, but individual investors clearly are.



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Company executives did go through an effusive recap of fiscal year results and upbeat predictions for upcoming products -- a litany broken up only by the wail of a fire alarm -- but audience applause was saved entirely for moments about the lawsuit. "Try your damnedest to see this lawsuit settled out of court," pleaded Harry from Yonkers.

CEO Bill Gates seemed to hold out little hope on that front. Microsoft has always been willing to settle, Gates said, but the government asks too much.

"If we can't add Internet support, we can't add any new features," Gates said. "If we can't define the user experience ... then the Windows brand becomes absolutely meaningless. No company should accept these limits on their ability to innovate."

One of the most popular lines came from a man who described his disappointment and "deep humiliation" at the results The People vs. Microsoft so far. "I'm very concerned that the quality of our company is not being reflected in the quality of our counsel," declared one attendee worried that the Department of Justice has "outrun and outmaneuvered" Microsoft's lawyers during the antitrust case.

Gates defended general counsel William Neukom and his team. "It's pretty important in a case like this not to look in a very superficial way for someone to blame," Gates declared. "You can ask yourself how we got into it, but it's really the government who decided to block those innovations. ... I'm really supportive of what (our team) has done."

Sounds like the Microsoft boss believes the company simply couldn't overcome the government's case. If that's so, doesn't that imply that there's some substance to the government's claims?

Just wondering.

Naturally, Gates and other Microsoft executives continue to maintain hopeful, at least in public, about their chances of getting through the judicial process relatively unscathed. But worried attitudes seemed contagious this morning, with concerns about almost anything during the Q&A portion of the meeting.

Joanne from Seattle wanted to know if Microsoft is prepared should the government break up the corporation. Executive Vice-President Bob Herbold basically answered (major paraphrasing here): "It's too early to talk about that. We think we'll win. We'll keep fighting. Cue the clapping."

Ok, he didn't say anything resembling that last part. But the audience did anyway.

My favorite question came from an elderly woman (audiences at corporate America's annual meetings tend to be dominated by retirees, because they have time to attend) who complained about being forced to walk to the aisle before asking: "Seattle is supposed to have a big earthquake, are you prepared for the destruction and all of that?"

Answer: They're working on it. They've already made sure large data centers are safe.

Speaking of those data centers, one gent asked if Microsoft wasn't becoming a network computer advocate in the mode of Sun and Oracle, since Microsoft suddenly seems to be pushing the idea of renting applications over the Web. Replied Gates (more paraphrasing here): "Network computers are dumb pieces of hardware. The real answer is a software solution that uses a real PC, and we think we can whoop ass on Sun and IBM when it comes to software. Oh yeah, Oracle's a software company, but they make databases, and we're catching up to them there."

(By the way, since Microsoft bandies the word "innovation" around so much, it's worth asking who came up with the idea of Web apps in the first place. Hint: it wasn't Microsoft)

It should be noted that the audience gave Gates and his team a standing ovation, so the shareholder populace obviously remains pleased with what they have. And perhaps they were happy to hear that the fire alert turned out to be a false alarm.

Other issues:

  • Liberate Technologies
  • (Nasdaq: LBRT) The maker of Internet access software is shooting higher today after announcing a deal with Cable & Wireless Plc. Dain Rauscher Wessels also started coverage of Liberate with a "buy" rating, arguing that Liberate's cable set-top boxes will do well in the TV Internet battle against WebTV. "While Liberate is not yet profitable, it has already established relationships with several large technology vendors and has a strong initial customer base," Dain Rauscher notes.

  • NextCard
  • (Nasdaq: NXCD) A deal with Amazon.com (Nasdaq: AMZN) is boosting the online credit card issuer. NextCard indicated something was coming, so perhaps this shouldn't have been too much of a surprise. 22GO>