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Microsoft stock drops on antitrust findings

Shares of Microsoft drop while Linux boosters soar as the markets react to the finding that the software giant holds a monopoly in the computer software market.

Shares of Microsoft fell today following a federal judge's finding that the software giant holds a monopoly in the computer software market.

At the market close, Microsoft fell 1.62 points, Microsoft's day in court settling at 89.94. Earlier this morning, the company shed 6.81 points, dropping nearly 8 percent.

The Dow Jones Industrial Average was also hard hit at the open, losing over 40 points, but recovered some of its earlier losses at the end of the day. The Dow closed ahead 16.52 points at 10,721.

Microsoft competitors enjoyed a positive run amid the negative news surrounding the software giant.

Shares of Red Hat, a leading seller of the Linux operating system, topped 21 percent, closing up 18.06 at 104. Even Be Incorporated, the maker of BeOS, another alternative to the Microsoft operating system, jumped more than 70 percent, ahead 2.69 at 6.5.

Other Microsoft competitors, including Sun Microsystems Full text of Judge Jackson's findings of
fact and database software maker Oracle, also traded stronger. Shares of Sun advanced 2.31 at 122, and Oracle rose 0.75 at 59.44.

"This is a temporary wave they're riding on," said Melissa Eisenstat, a financial analyst at CIBC World Markets. "You'll see [the stocks] counter whatever Microsoft does."

Microsoft's stock was added to the Dow Jones Industrial Average last week. For every dollar drop in Microsoft shares, the Dow was expected to drop five points.

Bill Epifanio, an analyst at JP Morgan, said Microsoft's stock had been lower in the week prior to the announcement and investors should be prepared to see a drop of another 5 to 10 points before a rebound. He said a rebound depends upon the Street's reaction and its willingness to absorb the negative news.

Financial analyst Chris Galvin at Hambrecht & Quist said: "Clearly, stage one [of the verdict] was a blow to Microsoft, but it's far from over." He added that investors need to remember the company is also in front of a major product cycle with Windows 2000 and that all news about the company is not negative.

"From a business standpoint, [Microsoft] is doing well," said CIBC's Eisenstat. She said while the finding clearly has a negative impact on the company's stock, "PC demand remains strong, driven by the Internet and the Internet as a part of their business is becoming a bigger part of their story," noting the large investment Microsoft is making in the Internet, including recent equity investments in Net start-ups.

"We're encouraging people to buy at the first signs of a bounce because fundamentals are so strong," Epifanio said.

Galvin said Microsoft's stock performance today will have a "favorable impact on the competitive OS, or operating systems, environment." Galvin said he still holds Microsoft at "buy" and has no immediate plans to change his stock rating.

"So, the Red Hats, the Suns, will probably enjoy good days being that Microsoft is under such government scrutiny," he said.

JP Morgan's Epifanio agreed, adding that "the likes of AOL, Sun, Oracle, and Red Hat are all likely to benefit today."

Late Friday, U.S. District Judge Thomas Penfield Jackson determined that Microsoft holds a monopoly in computer operating systems. The judge released 207-page statement, called a "finding of fact," that strongly indicates that Jackson is leaning toward the Justice Department's arguments against Microsoft in one of the most closely followed corporate cases in recent history.

Following Friday's announcement, Microsoft's stock slid in after-hours trading into the high 80s, closing down 0.19 points at 91.45.

Asian and European stocks were both lower amid worries that Microsoft's antitrust finding could affect U.S. markets when Wall Street opens.

The Nikkei average closed down 0.6 percent at 18,240.98 on sluggish trade Monday. Hong Kong stocks also closed down 0.7 percent to 13,521.11.

Trading in European markets was also weaker. Shares of European technology companies fell as a negative response to the finding against Microsoft. Software groups in the Dow Jones European technology index lost between 1 and 2 percent, dragging the index lower to around 0.57 percent after touching a new, all-time high of 473.69 points on Friday.

German business software maker SAP and Dutch software firm Baan were among the European technology stocks trading weaker following Microsoft's news.