I halfway expected to get a grumpy call from my email ISP this past weekend. No sooner would I download another hundred semi-frantic
subscribers' emails asking
than another hundred would hit my box. Hour after hour, it didn't let up. I didn't add 'em all up, but the total was certainly several hundred messages.
Yes, it's tempting to do something first thing Monday morning, with so much apparent activity on the Microsoft-
front. Americans in general and investors in particular always have a bias toward action in any fluid situation.
But that leads, far too often, to a
ready, fire, aim!
kind of nonstrategy. My advice, after days of talking with people connected with the Microsoft-Justice Department negotiations, other journalists and analysts: Keep your powder dry.
Let's review what we know, what we think we know and what we don't know.
What We Know
We know that U.S. District Judge
Thomas Penfield Jackson
, the trial judge, has been pushing both sides hard to reach a negotiated settlement. We know that Chicago U.S. Court of Appeals Chief Judge
, appointed by Jackson as a kind of special master and
negotiator in this case, has been pushing both sides to settle. We know that, so far at least, nothing has come of their efforts.
We know that Jackson has said that if no settlement is reached by March 28, he will hand down then his Conclusions of Law in the antitrust case against Microsoft -- a document nearly every sentient being on the planet expects to come down hard on Microsoft, finding the company guilty of explicitly violating antitrust laws.
We know that late last week, Microsoft faxed a long and complex proposed settlement agreement to the DOJ attorneys and also to the attorneys general of the 19 states which have joined the Justice Department in this action.
Finally, we know that both the Justice Department and state attorneys general, after examining the Microsoft offer in settlement, thought so little of it that they declined even to fly out to Chicago over the weekend for what promised to be one big sit-down indeed, a marathon negotiating session based on that Microsoft offer.
That is ALL we really know.
What We Think We Know
We believe we know that Microsoft, in its offer in settlement, offered what looked like some obvious, small-change concessions: an unbundling of Internet Explorer from its Windows packages; fairer pricing for all OEMs buying Windows to preinstall on the PCs they sell; some acceptance of government oversight of Microsoft's future conduct on disputed business practices, but not on technological issues; and public release of some parts of the program code for some versions of Windows, perhaps allowing others to build and sell compatible, Windows-like operating systems in competition with Microsoft.
We believe we know that Microsoft is afraid of the Tuesday deadline and a horse-out-of-the-barn finding that it committed specific antitrust violations, not least because it fears how those findings might be used in potentially massive civil suits against the company from aggrieved customers in the months and years to come.
We believe we know that the government's case may be looking less solid these days than it once did, and that saving some kind of win -- less than it wants, maybe much less than it thought possible several months ago, but something which would help it save face after spending millions of dollars of public money pursuing Microsoft -- would be a politically wise move for the Justice Department.
We believe we know that some of the state attorneys general offices involved in this have dug in their heels on a settlement, and say they don't want just a "conduct" remedy, in which the government would have continuing oversight of Microsoft's future behavior, but a true "structural" remedy, in which Microsoft would be broken up into two or more new, smaller companies. Or, perhaps, would be forced to release Windows code into the public domain, or at least to a few selected competitors.
We believe we know that Microsoft has considered, and probably still is considering, taking its chances with a loss at trial in Judge Jackson's court, hoping for a better result on appeal to friendlier courts.
And we think we know that Microsoft has a finger in the breezes of national politics, perhaps believing that if it can stall proceedings until a new Republican administration might be elected in November and installed next January, new management at Justice would call off the dogs -- or at least, tell its attorneys and those from the offices of the state attorneys general to settle for a half a loaf, and be quick about it.
What We Don't Know
First, we don't know if
of our conjecture in the "What We Think We Know" column is correct. This has been a relatively leak-proof process, with Judge Posner apparently promising Draconian penalties for those on either side who leak word of progress, or the lack thereof, to the press.
Almost everything we think we know has come from reporters, columnists and analysts -- including this one -- and while that may have been good journalism, is still far from confirmed fact.
Beyond that, we also don't know Judge Jackson's present willingness to stretch out the negotiating period even further. We don't know how hard Judge Posner has been on both sides. We don't know exactly what Microsoft has proposed, nor what Justice has disposed. We don't know which, if any, state attorneys general have pushed hardest here, and how much of that has been posturing vs. conviction.
Maybe most important of all, we don't know what
and their advisers and counsel really think about how far they should go in a settlement, how much they should be willing to give up.
All that is both unknown and unknowable to us as investors right now. And it may stay that way for weeks, perhaps months, to come.
Meanwhile, we've got a jittery market eager to
about Microsoft's stock price.
As I've said here before, I think Microsoft's stock is now sufficiently undervalued that if a pro-Microsoft settlement (or at least one generally perceived as not too
Microsoft) were announced, the share price could shoot up 50 points in a day. Maybe more.
I don't think the downside, in the event of a very tough settlement or a harsh verdict, is that large, but Microsoft could easily slip 20 points in a day or two if what seemed to be bad news about its future came down.
That more limited downside exists because many analysts, including me, think the total value of a divided Microsoft would be greater than the sum of its parts, so that present Microsoft shareholders would wind up, after some period of confusion and reorganization, with a basket of shares valued more highly than Microsoft's price at the announcement of a breakup.
So I say ... sit tight a little longer. I don't think last week's 10% run-up in Microsoft's share price was the start of a big trend, but rather a tentative response to early rumors that a settlement might be in the works.
I think going way long Microsoft Monday, in expectation that it will now finally be able to shed this worrisome antitrust action, and that we'll never see these prices again, is premature -- and a foolish risk.
I also think shorting the stock, in expectation of a harsh ruling by Jackson Tuesday and further bad news from Microsoft down the road, is also needlessly risky.
If I were a Microsoft holder -- I'm not -- I'd sit tight. If I didn't have a share, I wouldn't see this as a moment to go long or short the stock.
Yes, it's hard to keep your head when all around you are going nuts. Yes, it's always tempting to indulge that bias for action --
action! action! ANY action, please!
-- when we think we may be creeping up on a major hinge-point in the valuation of a company.
But this isn't -- yet -- that moment. We just don't
enough to act.
Stay tuned to
for continuing, up-to-the-minute coverage of the Microsoft-DOJ talks, or nontalks, and for word tomorrow of Judge Jackson's decision, if any.
Interesting times, huh ... ?
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