Justice to Microsoft: Be Afraid, Be Very Afraid

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Just when you thought it was safe to back into the market, someone caused quite a panic on Wall Street Monday by leaking the Justice Department's proposed remedy in the Microsoft antitrust trial to the press this weekend. The reported remedy introduces a new wrinkle to the whole matter: that Microsoft be strictly controlled during the appeals process. This follows talk that any remedy handed down by the court after the years it will take to sort our the appeals would be made moot by advances in technology. According to reports in three major newspapers Monday morning, the Justice Department and 19 states filing the antitrust suit against Microsoft will seek a breakup of the firm. But that's not the real news. The warning siren from Microsoft's standpoint is that Justice reportedly intends to seek interim relief while the case gets dragged through the nation's courts, including a halt to Microsoft's alleged bullying practices and, more important, having the firm reveal the inner workings of its Windows software. The prosecution has until Friday to submit its proposal. The remedy hearing is set to begin May 24.

To date, opening up Windows for the world to see has been a deal-breaker for Microsoft. But if the software package's secrets are revealed as part of a temporary injunction, they'll stay revealed regardless of the case's outcome — a fact that must have Bill Gates and his Redmond techies shaking in their sneakers. The other consequence of the leaked proposal (which Justice hasn't confirmed or denied) that could push Microsoft to the bargaining table is the potential diminution of its executives' stock portfolios. On news of Justice's intentions, Microsoft stock dropped 15 percent in pre-day trading Monday morning, setting a 52-week low.

Earlier this month, when Judge Thomas Penfield Jackson found that Microsoft had abused its monopoly power, the firm vowed to appeal — an apparent attempt, at least in part, to quell investor concerns over the future of the firm. The appeals process is expected to drag on for at least two years, an eternity in tech time. But on news of the proposed remedy, investor concerns appear to be in full force once again. Before 10 a.m. on Monday, Microsoft had dropped more than 12 dollars per share to $66.63. After steady gainst throughout the second half of last week, the NASDAQ finished down over 161 points Monday, or roughly 5 percent. It's hard to imagine that not serving as some sort of wake-up call to the Microsoft brass.