2HRS2GO: Antitrust worries ripple through Wall Street
Feel those Microsoft (Nasdaq: MSFT) waves rumbling through the market.
This weekend's collapse of settlement talks between the software giant and government prosecutors not only slashed more than 13 percent off MSFT shares today -- it seems to be shuddering through through other companies as well. Now anything remotely related to antitrust comes across Wall Street's eye.
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JDS Uniphase (Nasdaq: JDSU) and E-Tek Dynamics (Nasdaq: ETEK) can testify to that. The companies today issued a press release that basically said "The government is still looking at our merger."
Shares of both companies fell on the announcement.
Once upon a time, a Hart-Scott-Rodino inquiry wouldn't have been news. After all, the parties originally said they didn't expect the deal to get all the needed approvals until the second quarter anyway.
But nowadays the mere fact that the government asked for more information merits a press release. It's about full disclosure, according to E-Tek spokesman Gerald Gottheil. "We're trying to be as careful as we can to follow the procedure as closely as possible," he says. "I think it's not a huge thing, but anything that's material ... we let people know."
The news release wasn't motivated by larger market concerns about antitrust issues in general, Gottheil says. Because there was the (remote) possibility the deal could close in the first quarter, the companies felt obligated to say why it didn't, Gottheil says.
I'm skeptical. Even if Microsoft's trial wasn't actively on the minds of companies facing scrutiny under the HSR antitrust law governing mergers and acquisitions, Gates vs. Klein weighs on the unconscious of anyone trying to secure a dominant market position.
Then again, more information in general seems to be seeping out in the form of PR, notes Alison Reynders, E-Tek's manager of investor relations.
"I'm not sure if it's not just an overall trend," Reynders says. "People want more information on all fronts ... There are analysts now probing for more in-depth information, even individuals are asking more probing questions. Five years ago, someone asking for an annual report was a shock."
Unfortunately, companies still have different definitions of what might be "material" enough to announce. Do advanced negotiations for an acquisition fall into the material realm? Qwest Communications (Nasdaq: QWST) thought so in the case of its reported talks with Deutsche Telekom (NYSE: DT). So did America Online (NYSE: AOL) during its discussions with Netscape.
Yet most companies refuse to publicly comment on any M&A.
"If it were us, we would probably argue advanced negotiations are not material," Reynders says. "Because they could fall apart."
She has a good point. But don't be surprised to see more antitrust-related news drifting across the tech sector, where M&A has accelerated in recent years. Between a confident U.S. Department of Justice (Big tech firms must be praying for a Bush presidency, since Republicans carry the image of being less antitrust-oriented, even though AT&T was broken up by Reagan) and a more agitated stock market, expect a news release every time regulators ask for a photocopy of a company file.
Antitrust even rears its head in mergers of players that aren't dominant. Columbia House blamed regulatory approval delays for the demise of the its merger with CDNow (Nasdaq: CDNW). I have my own speculative theory about the deal's collapse, but I suppose regulators make a convenient scapegoat.
At least increased disclosure fuels one sector of the economy.
"Hey, it's fine with me," says Reynders. "It gives me a job."
Me too.
Other issues:
The October Revolution turned into a tragedy. Willy Loman's life of hard, meaningless and unrewarding work is a tragedy. Richard Nixon's presidency might be considered a tragedy, at least in the mind of Oliver Stone.
Losing 6 percent on the Nasdaq Composite Index doesn't come close to meeting the definition, especially not in our contemporary market environment of extreme volatility. Maybe a market plunge is alarming, but it's not at all tragic, except maybe for heavily margined players deluged with calls coming due. Even then, it's more pathetic than anything else. 22GO>