Appeals Court Ruling for Microsoft Sets Up Likely Settlement

Microsoft wins big, twice, but still has to deal with angry state attorneys general.
By Jim Seymour ,

On first reading, it looks like the

U.S. Court of Appeals

gave

Microsoft

(MSFT) - Get Report

everything it needed ... if not everything it wanted.

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The two key, explicit, parts of the court's ruling in its review of U.S. District Judge Thomas Penfield Jackson's decision in the

Justice Department

antitrust action against Microsoft, are that the company, despite acting as a monopoly, should

not

be broken up, and that in the rehearing mandated by the appeals court, Judge Jackson should not preside.

That cuts off major downside risks for Microsoft and also gives the company a fresh start with a new judge.

However

... the implicit part of this appeals court ruling may be the most important: Now the Justice Department can pick and choose where and how it wants to move -- including finding a basis for settlement with Microsoft.

In a very real sense, it is the end of the beginning and the beginning of the endgame in this trial. A

Bush Administration's

Justice Department may very well decide to go down the settlement path, especially since the appeals court's unanimous ruling indicates pretty clearly how further appeals would be decided.

The state attorneys general joined with the DOJ in the case are another matter, of course. They effectively killed the negotiated settlement the Justice Department was trying to work out with Microsoft many moons ago under the mentorship, so to speak, of Justice Richard Posner.

Now they may try to scuttle a deal once again.

The market responded predictably to the move: Microsoft shares jumped about $4 to $74.96, and at 11:32 a.m. EDT, trading in the stock was halted. At 12:15 p.m., it remains halted at $72.50.

It's worth noting that aside from the pop in Microsoft's stock, other tech companies jumped up as well, almost in unison. Many observers have noted that the pending appeals court decision pulled a tense cap over the price of other tech stocks. The market's initial reaction seems to confirm that.

More to come...

Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At time of publication, Seymour had no positions in the stocks mentioned in this column, although positions can change at any time. Seymour does not write about companies that are, or have been recently, consulting clients of Seymour Group. While Seymour cannot provide investment advice or recommendations, he invites you to send your feedback to

Jim Seymour.

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