Around midday today the rumor began to spread on the Street that most of the brutal selling on Microsoft (MSFT) this morning was past, and that after U.S. District Judge Thomas Penfield Jackson's release of his Conclusions of Law this afternoon at 5 p.m. EDT, we'll see buyers coming in in afterhours trading to re-establish Microsoft positions at the lower prices delivered by today's massacre.
I wouldn't be surprised. If you take the long-term view on Microsoft -- whole or split -- you've gotta think this one is going back up, and up a lot. With assets like Windows and Office, plus an unparalleled marketing machine, Microsoft is still a giant, if a humbled one, today. And no matter how much the munchkins (think Lilliputians) try to tie the giant down (think Gulliver), he will still roar.
If perhaps, shortly, in a much higher-pitched voice.
The print press was full of interviews with Microsoft bosses this morning -- to a man (and they are all men) saying they think this afternoon will mark the high-water point of the government's case, and that from here on out, in the hands of the appeals process, Microsoft is finally going to gain some traction.Choose one or more:
(a) Can you say "whistling past the graveyard?"
(b)Nicely orchestrated PR
(c) It's about time.
There's something to be said for the Microsoft managers' arguments. After Jackson lays into Microsoft this afternoon, things almost have to get better. The question is, how low the low? From how far down must that rebuilding begin?
In 1995, Bill Gates published an extended essay, in book form,
I've been saying for some time that Microsoft is clearly en route to becoming a Web-based services company, not a shrink-wrapped software producer. It may very well become the world's largest renter of software under the ASP, or Application Service Provider, model; it will be huge in providing the integration services that are the real-profit opportunities underneath the ASP model of software delivery; and I think it will become a major provider of other sophisticated services delivered over the Web. If widespread use of Web apps means we are headed for a de facto operating-system-free world, then Microsoft will fold its Windows tent as slowly as any other business would stretch out earnings from a cash cow. Microsoft is firmly set on this path internally, but it also knows it needs the revenue from current shrink-wrap products to bridge the uncertain, years-long interval to that Brave New World. The company's real interest now, therefore, is in fighting an effective delaying action on this antitrust action, limiting the damage to its revenues from shrink-wrap and original equipment manufacturers while it rebuilds itself on the Web-services model. Its interest is not, of course, allowing itself to become hobbled in that new world -- potentially a far richer market, with an even more powerful position -- by settlements or verdicts laid down today and based, as this whole antitrust action has been, on yesterday. Keep that in mind as you watch Microsoft's maneuverings this week, this month, this year. They know they can't return to what they were -- and they don't want to. They need to run two parallel companies now, one very much invisible, as they move forward. It will be a tricky dance, and for those executing it in Redmond and Washington, a potentially schizy one. For investors, buying into that "new Microsoft" could be hugely profitable. But timing that buy will be hell.