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Microsoft woes benefit competitors

Netscape isn't the only company that stands to gain from the software giant's legal battle. Oracle, Sun, and even Apple may too.

Netscape isn't the only company that stands to gain from Microsoft's legal battle with federal and state regulators.

The antitrust suits already have nudged the stocks of the software giant's other competitors--such as Oracle, Sun Microsystems, and even Apple Computer--and all of the negative publicity surrounding the regulatory clash still may sway consumers and businesses to buy from someone other than Microsoft, according to some analysts

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Microsoft sued Indeed, in the weeks leading up to the decisions by the Justice Department and attorneys general offices in 20 states to file suit against Microsoft, the company's stock has taken a step back as the competition has inched forward.

Sun's stock, for example, has gained nearly 10 percent since mid-April. Apple has gained more than 15 percent, although some of that upside is attributed to the company's recent healthy earnings report and the launch of several new products. Analyst say, however, that the Microsoft lawsuit certainly isn't hurting the financial outlook of the two companies.

Sean Kaldor, a PC analyst at International Data Corp., said Apple should see a "slight uptick" in sales because the legal battle inevitably is bruising Microsoft's once mighty image. As a result, he said, the lawsuits may be giving Mac users who were considering the possibility of switching to Microsoft sound reason to stick with Apple--at least for the short term.

"This lawsuit reeks of bad PR for Microsoft, and Apple is your friendly little PC maker," said Kaldor. "For people on the fence, [the lawsuits] help tip the scales. It bloodies the nose of Microsoft, and it certainly doesn't hurt Apple."

Apple declined to comment on the lawsuits, said Rhona Hamilton, a company spokeswoman.

Other analysts, however, agreed that Microsoft's considerable legal woes may serve to sustain Mac users who were toying with the idea of switching teams.

"We are not going to see Windows customers migrate to the Mac because of the [the Microsoft lawsuit]," said Credit Suisse First Boston analyst Charlie Wolf. "But it might help Apple with its installed base."

Wolf noted that the antitrust lawsuits may have had an even greater effect on Apple if they had come two months down the road, because Apple's latest and greatest desktop, the iMac, is not yet available to consumers.

"If users could see that Apple was delivering sensational products right now," then that could be a benefit, but the iMac won't be available until August, he said.

Wolf added that the lawsuits are a bigger deal with investors than they are with consumers.

The numbers bear out Wolf's assertion, as Microsoft shares have retreated during recent weeks. The software giant's stock traded as high as 99.13 late last month, but sunk to 86.5 at yesterday's close, and has continued tumbling in trading today.

If the same legal fallout that may benefit Apple seeps into the server market, Oracle and Sun also could benefit from the suits, because both compete directly with Microsoft in the server sector. Both have been outspoken about their satisfaction with the course the legal actions have taken so far.

"We applaud the Department of Justice, the 20 state attorneys general, and the District of Columbia," Sun said in a statement released after the lawsuits were filed Monday. "Vigorous competition is vital to the success of a free-market economy."

Netscape and others--including Sun, Oracle, Corel, the Software Publishers Association, and the Computer & Communications Industry Association--have joined forces in a lobbying group called ProComp, which has actively supported allegations that Microsoft has engaged in anticompetitive business practices.

One analyst said that computer users, unlike investors, are not putting much weight in the legal hype surrounding the case. In determining what products to purchase, he said, users tend to focus primarily on product quality and functionality.

"The consumer is looking for a solution, and it doesn't matter who is making it," said Dataquest analyst Jerry Sheridan. "I wouldn't see a mass migration away from Microsoft."

"The brand itself has become transparent," he added. "The lawsuits should not sway [consumers]."