Shares of Microsoft Tumble On New Reports, Weak Sales
An INTERACTIVE JOURNAL News Roundup
NEW YORK -- Shares of Microsoft tumbled 15% early Monday, leading the technology-heavy Nasdaq Composite Index sharply lower.
In early trading, shares of Microsoft were down 11 13/16 to 67 1/8 on the Nasdaq Stock Market. The Nasdaq composite was down 183.80 to 3460 and Morgan Stanley's high-tech 35 index fell 26.50 to 894.70.
The losses followed Thursday's quarterly earnings report -- which showed weaker-than-expected revenue -- as well as several reports about the future of the company. The stock market was closed Friday for a holiday.
The Wall Street Journal said Monday that federal officials favor a divestiture of Microsoft's Office software business to spur competition in the industry. The company would also be subject to wide-ranging restrictions as an appeal is pending and a breakup of the unit was under way.
Meanwhile, the Washington Post reported that the Justice Department and the states are leaning toward asking a court to split Microsoft into two or three separate companies, citing people familiar with the discussions.
On Monday, Goldman Sachs & Co. dropped Microsoft from its recommended for purchase list and Lehman Brothers Inc. lowered its 12-month price target to $85 from $130, according to CNBC. Also Monday, SG Cowen & Co. cut its rating on Microsoft to "buy" from "strong buy."
Federal officials have been working on a remedy recommendation in the landmark antitrust case since a federal judge ruled against the company three weeks ago. These officials now have begun asking for feedback from personal-computer makers and others on a possible Office divestiture, signaling that they may settle on this approach to present to U.S. District Judge Thomas Penfield Jackson, who wants remedy proposals by Friday.
These officials looked to divestiture as the least "regulatory" means of reining in Microsoft's monopoly, said people who were briefed. Divestiture of Office and other software applications, while falling short of some of the breakup proposals that have been broached, would substantially restructure the world's largest software maker.
Monday's Market Activity
Elsewhere in the technology sector Monday, Netzero gained 3 19/32 to 11 7/8 on Nasdaq. Qualcomm agreed to invest $144 million to acquire a 10% stake in the provider of free Internet access (see article). Qualcomm slipped 7 1/2 to 102 on Nasdaq.
Priceline.com gained 4 1/8 to 63 3/4 on Nasdaq. The Internet company that allows customers to submit their own prices for various products and services posted a narrower first-quarter loss as revenue increased sixfold on the back of a growing customer base (see article).
Xilinx slipped 1 3/4 to 65 13/16 on Nasdaq. The chip maker reported a huge increase in fiscal fourth-quarter net income, helped by a big acquisition-related gain. Sales were strong and core results inched above Wall Street's expectations. W.R. Hambrecht raised its rating on the chip maker to "strong buy" from "buy."