Microsoft's Hurried-Up Tandy Announcement - TheStreet

Microsoft's Hurried-Up Tandy Announcement

Seymour says the Tandy deal was likely pushed up a bit to goose this week's recovery in Microsoft's stock price. Tell us what you think on our message boards.
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So was this Microsoft (MSFT) - Get Report-Tandy (TAN) - Get Report deal cooked up as a quick, stock-boosting response to Judge Thomas Penfield Jackson's painful preliminary ruling last Friday in the Justice Department antitrust action against Big Redmond? A little stock-cooker?

Microsoft: Join the discussion on

TSC

message boards.

Of course not. Deals on this scale take longer to hammer out than the few days that elapsed between Friday night's ruling and Thursday's announcement. But is it possible that the announcement of the deal was, shall we say,

ooched

forward just a bit to help support Microsoft stock this week?

You bet. No hard evidence here, but insiders on both sides say the rollout was pushed up a little to help goose this week's recovery for Microsoft's stock price. And it worked: The shares closed Thursday at 89 5/8, up two and a half bucks from Wednesday's 87 1/8. That's just two dollars less than the stock's close last Friday, before the judge's findings of fact were released after the market close.

My email box is full this week of pleading notes from

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readers looking for guidance on Microsoft. Will it continue to climb back out of the barrel it's been in since late September, when it closed at around 97, near its 52-week high of 100 3/4? Will it wallow around for a while, then start climbing back up? Or is this a crippled duck, flopping around in the marsh for the foreseeable future?

Hard call, but count me among the "wallow-around-for-a-while" crowd. I don't expect to see Microsoft roar ahead over the next few weeks; the sword of Damocles -- oops, the sword of Jackson -- hanging over the company's neck is too big a weight to completely throw aside so fast. Whatever the final outcome here -- a negotiated settlement, remedies imposed by Judge Jackson, a years-long appeal, or a combination of the last two -- Microsoft will be operating under a cloud for some time to come.

Yes, I think Microsoft will survive and prosper, as I've written here several times in the last week. No, I don't think investors can afford to simply ignore the Jackson FOF et sequal, and trade Microsoft up as in the good old days.

But if I held a Microsoft position, I wouldn't be bailing right now. Maybe locking some profits, if my average cost was well under yesterday's close, by selling part of the position; maybe sell some more as part of year-end/Y2K planning. But dump and run? No way.

At least, not yet.

However -- and this is a big however -- I wouldn't invest a lot of new money in Microsoft right now. I think Microsoft is pretty close to dead money until there's a resolution of the antitrust issue ... or at least, some major good news for the company.

Looking ahead, I don't see any obvious opportunities for that good news over the next quarter.

Windows 2000

(formerly Windows NT 5.0) has been announced for February delivery, and I think Microsoft will hit that ship date. But just shipping Win2000 is not going to be a big revenue event for Big Redmond. And there are no other major releases scheduled for the next few months.

Though I don't expect to see a sag in Microsoft revenue in the current quarter -- CFO

Greg Maffei

will report good numbers, and give us the standard Microsoft warning that this can't continue -- I also think a flattening of revenue growth is inevitable, due more to the confluence of market forces than the antitrust proceedings.

I've also had a fair number of reader notes saying I overdrove my headlights in one of my columns in the wake of the Jackson findings, on whether the pending action had tempered Microsoft's competitive instincts and behavior during the last year.

They were right. I was wrong.

Not in the ways some readers suggested, I think, but in another important way. Turns out, according to insiders at Microsoft, that the much-leaked plan to announce a couple of months ago a free tier of dial-up-speed MSN access to the Internet was apparently scuttled by Microsoft's lawyers who saw it as a needless provocation of Judge Jackson and the

Justice

team.

We may yet see that free-access offer, but probably not until free Net access from other major entities is better established than it is today. Microsoft needs to appear to be merely swimming in the wake of its most important competitors on this, struggling to keep up, rather than staking out any new ground. Else it will be seen as yet more evidence of predatory behavior. (Can you hear

America Online

(AOL)

warming up its press-release machine?)

Should we add the phrase "AC," for "antitrust correctness" to the language, in addition to "PC," for political correctness? Or are the really the same thing?

USinternetworking

(USIX)

closed up a fat 57 9/16 Thursday, almost a four-buck gain, after the announcement yesterday of a deal to deliver

Microsoft Office

as an ASP product. As mentioned here in two

columns back in

June, USIX -- along with

Corio

and

FutureLink

(FLNK)

, among the early leaders in the ASP, or application service provider business -- is pressing ahead aggressively to sign up software publishers for its line of ASPed products and services.

Key in these offerings is that USIX (like most other ASPs) bundles ongoing support with delivery of an application via the Web. This is especially appealing to companies that are reluctant to put any more money down on what they see as the in-house tech support hole, and can't stand the idea of their workers spending hours on the phone waiting for Microsoft to answer.

Indeed, many ASPs are trying to change the moniker to "TSP," or "total solution provider," to emphasize the value-add of their services in installing and customizing applications, and their back-end post-sale tech support.

I don't see broad ("horizontal"), relatively inexpensive products, such as Microsoft Office, becoming very important in the ASP equation; it's too easy to just go down to the corner store and buy a copy or two or 10, then put up with lame tech support, rather than signing up for the drip-drip-drip of monthly, quarterly or annual ASP fees -- plus the need to be constantly connected to the Net to make use of the product.

Specialized, high-dollar applications, such as those from

Oracle

(ORCL) - Get Report

,

PeopleSoft

(PSFT)

,

SAP

(SAP) - Get Report

and other apps generally limited by their purchase and installation costs to very large companies, are likelier to be much more important in ASPs' lists of available software.

But adding Office to an ASP's quiver of solutions helps close the sale, because it lets an ASP bid become a company's sole supplier of software, allowing the client to trim or maybe eliminate in-house tech support shops. That's a compelling, if somewhat deceptive, sales pitch, and corporations can expect to hear it with increasing frequency over the next year, as the ASP model becomes more important, more mainstream.

ASPs still look like good investments -- when you can get in. Around 60 -- back up into the rarefied air of its first-day, April IPO close -- I think USIX is pretty fully priced. I expect to see a fat IPO from Corio, still cruising on venture capital (from the likes of

Kleiner Perkins

and others), sometime in the first quarter of 2000. If you want in then, start cozying up to your broker now; this is likely to be another of those wildly oversubscribed, limited-availability offerings.

If you don't want to wait for Corio, and find USIX too expensive right now, you could also buy FutureLink, the "computer utility company" ASP that has been, if anything, even more aggressive than USIX in signing up software shops to deliver their products. But FutureLink has already doubled since the first of November, and at Thursday's close of 32 and change, also looks expensive.

If you've been in FutureLink -- recommended here in late June when it was hovering around 6 -- for a while, you have a nice gain. The question is whether it can continue its torrid pace since June, a five-fold gain so far. Harvest time?

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, neither Seymour nor Seymour Group held positions in any securities mentioned in this column, although holdings 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 your feedback at

jseymour@thestreet.com.