Investors and analysts see little downside in Microsoft stock, even after its latest legal setback.
Microsoft closed the day at 136-3/4, down 2-5/16. Yesterday's court ruling may have had a slight effect on shares in Netscape Communications (NSCP), Microsoft's primary competitor in the browser business, which ended the day at 27-7/8, up 1-5/8.
Analysts did not change earnings estimates or recommendations for either company today, according to Chuck Hill, a spokesman for First Call.
A federal judge yesterday issued a temporary injunction prohibiting Microsoft from requiring computer makers to include its Internet Explorer browser when installing Windows 95.
Microsoft spokesman Mark Murray said concerns about delays for its next operating system, Windows 98, apparently did not figure in today's market activity. He said Microsoft still plans to ship Windows 98 during the April-June quarter. (See related story)
Analysts said that even if the debut of Windows 98 is delayed, it will have little material effect on the company. The effect on Microsoft's stock, however, may be a different matter.
"Psychologically, [a delay] could be a big impact and the stock could take a hit. But in terms of a revenue impact, it's probably not much," said Rich Scocozza, an analyst with Bear Stearns. "If its delayed to the third or fourth quarter, I don't think people will notice. People will just continue to buy Windows 95."
The company has said previously that Windows 98 is considered a minor upgrade to its predecessor. However, the operating system is the company's highest-profile product scheduled for the coming year.
As a result, some analysts anticipate that Microsoft will see a slowing of revenue and profit growth in 1998, compared with previous years. Before yesterday's action, NationsBanc Montgomery Securities analyst David Readerman had said in a recent report that Windows 98 was expected to generate $3.1 billion in revenues over the next 24 months.
Netscape CEO Jim Barksdale said his company will take advantage of Microsoft's legal setback to become more aggressive in wooing computer makers with special pricing deals. But that will be an uphill endeavor given that OEMs can get a browser for free with the purchase of a Microsoft operating system.
But analysts and many PC makers still expect Internet Explorer to be installed in new boxes because it will not cost any additional fees. "The reality is, I can't identify one PC hardware vendor who will choose not to bundle it now that it's going to be out there," Scocozza said.
Reuters contributed to this report.