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Stock price keeps black clouds over Redmond

Microsoft stock sinks near a 52-week low at the same time the software giant proposes that it not be broken in two as the government has proposed.

Microsoft's stock hovered near a 52-week low at the close of trading today--the same time the software giant proposed that it not be broken in two.

In court documents, Microsoft immediately offered to accept restrictions on its business practices--a concession that surprised some.

Some investors remained hopeful that the concessions would boost the software giant's stock from its doldrums. But they conceded court proceedings will be a long, drawn-out process.

"Even if the court were to accept their remedy proposal, chances are high that they would still file an appeal," said James Ragan, a senior analyst at investment bank Crowell Weedon. "I don't expect this to be over quickly."

In its filed proposal, Microsoft said it would immediately accept restrictions on its business practices if a federal judge throws out a government proposal to split it into two companies. Late last month, the Justice Department and 19 states proposed the creation of two businesses--one focused on the operating system software that runs computer hardware and the other on software applications.

"I think (Microsoft is) trying to show the court that they are taking this seriously and that there are things that can be done without breaking up the company," said Ragan.

David Smith, an analyst at Gartner Group, agreed. "Microsoft appears to be willing to make more concessions than before," he said. "Looks like you are starting to see the beginnings of serious negotiations."

Yet today?s news didn?t do much for Microsoft?s stock price, which was rocked by the earlier Justice proposal. Microsoft fell today to $66.06, down $1.75. It has traded as low as $65 and as high as $119.93 in the past 52 weeks.

In addition, Microsoft faces an increasingly tumultuous landscape because of increased competition and worries about a slowdown in revenue growth. The looming uncertainty has pushed the company's stock down more than 43 percent for the year.

"There are lots of black clouds over the company right now," said Jeff Maxick, an analyst at Madison Securities. "You aren't going to have a catalyst for the stock to move higher with the trial hanging over it and if earnings are just so-so."

Analysts said investors Redmond's own remedy: Special Coverage expect the company to continue battling as the case winds its way through the legal system. While the uncertainty is already priced into the stock, analysts noted that the longer the case proceeds through the courts, the more Microsoft may see sentiment falling in its favor.

"From a broader sweep of historical perspective, time is probably on Microsoft's side," said Specker. "The longer the case goes on, the more the world will change, letting Microsoft perhaps more persuasively argue that they are not necessarily going to be a monopolist forever."

Legal experts have also noted that Microsoft may have smoother relations with the next administration in Washington.

Still, analysts said that regardless of whether the company has behavioral restrictions placed on it or is split up, the risk profile associated with owning Microsoft has changed permanently.

"Microsoft has long been owned by investors who believed it didn't have the sort of standard risk profile that a lot of technology companies do and that is probably going to be inaccurate," said Specker. "There is clearly some risk and that will change the way people view this company."