For Now, Hold On to Microsoft Stock, Financial Planners Say

Friday's findings of fact in the U.S. vs. Microsoft antitrust case are not cause to sell the company's stock, financial planners say. But the judge's ruling could be a wake-up call for investors who have put too much faith in the company's continuing prosperity.

Microsoft (MSFT Quote) stock is one of the best-loved of the past two decades. It's the fourth-most widely held stock by institutions, according to Thomson Financial Investor Relations, and it is owned by one-third of the nation's domestic equity mutual funds, according to Morningstar. Microsoft's $471 billion market cap as of Friday's close makes it the most valuable U.S. company.

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"The stock's been so good for so long that people have started to believe that it will just be that way permanently," says Jeff Merriman, a planner with Merriman Capital Management in Seattle. "They're investing a huge percentage of their net worth in that stock, and it's not prudent."

Merriman, who counts among his clients current and former Microsoft employees, says his advice to them won't change: They need to be diversified away from just one company, especially if that company is their employer.

"I would still encourage them to reduce their position in Microsoft -- or any company they work for," Merriman says. "But I don't know why someone would make a change based on the [ruling]."

Without concrete information about what the ruling is going to mean, any decision to sell Microsoft stock would be based on pure speculation, he says.

Besides, says Ben Tobias of Tobias Financial Advisors in Plantation, Fla., Friday's ruling was almost anticlimactic. "The trial has been going on for a long time and people have analyzed it up and down the you-know-what," he says. "The possible results are probably already factored into the price."

Tobias said he didn't realize the ruling was coming until contacted by a reporter.

And apparently, others haven't been worrying about Microsoft's fate lately either. While Microsoft-damning testimony was standard headline fare earlier this year during the trial, it has received less attention since final arguments were wrapped up in September. Of the financial planners contacted for this story, none had a client who voiced concern to them over the results of the case.

"You know, if Microsoft disappears forever, that might be sad, but that's not -- or shouldn't be -- the only investment you have," says Harold Evensky of Evensky Brown & Katz in Coral Gables, Fla. "It might hurt the market for a while, but long term the world will get along without them. It's just not something we would tell our clients to worry about."

So while the ultimate resolution of the antitrust suit is up in the air, planners say investors' course of action is clear: Hold on to the stock if you've got it, while remembering to keep your portfolio in proper balance.

And though anything's possible -- from a break-up of the company to a big fine to no action at all -- any outcome could still result in increased shareholder value for those owning Microsoft stock.

Splitting Microsoft into competing "Baby Bills" could be a blessing in disguise for shareholders, says Lou Stanasolovich, a planner at Legend Financial Advisors in Pittsburgh.

"Look at the AT&T (T Quote) companies that split up. Maybe it's been 15 years, but it looks like a pretty darn good investment if you had all of them back then," he says. "Maybe companies ought to split themselves up more often just for the sake of doing it. They return better shareholder value."

But while these planners aren't advocating that Microsoft shareholders take any drastic action, they're also not viewing the world through rose-colored glasses. All cautioned that because Microsoft is such a dominant company in U.S. and world markets, bad news for it could mean bad news for everyone.

"A big fine of $10 billion dollars would hurt, even for Microsoft, sorry to say," Stanasolovich quips. "If they do come out with something unbelievable, I think you might have the start of a market selloff to some degree."

Evensky agrees. "If it's really negative, it could kill the market for a while," says Evensky, who usually puts his clients into mutual funds, and not a single stock. "But we just sort of shrug our shoulders and say, 'That's interesting.' It's more of an intellectual curiosity for us."