|
Wall St. bullish on Microsoft
|
 |
November 8, 1999: 3:33 p.m. ET
Most analysts reiterate their 'strong buy' or 'buy' ratings on software giant
|
NEW YORK (CNNfn) - The verdict is in. Microsoft is still a buying opportunity, but don't necessarily expect to rack up near-term gains.
Wall Street investment firms on Monday were cautiously bullish in their assessment of the software giant's prospects following a federal judge's preliminary ruling that proved to be a decisive loss for the company and was characterized by some as being too one-sided.
Giving a pivotal victory to the U.S. government in the long-running antitrust trial against the software maker, U.S. District Judge Thomas Penfield Jackson said Friday that Microsoft possesses monopoly power in the market for PC operating systems and harmed consumers through its anti-competitive behavior.
The stock, which was trading at about three times its average share volume on Monday, was feeling some whiplash on Wall Street, trading down 2-7/8, or just over 3 percent, at 88-11/16 in late afternoon trade, but up from the day's low of 84-3/8.
Despite the unfavorable ruling, Chuck Hill, the research director for forecast-tracking firm First Call, said of the 25 analysts who cover Microsoft's stock, he had heard from 22 and all but one reiterated their ratings of "strong buy" or "buy."
But even the one firm that chose to downgrade the stock remained in the bullish zone.
Volpe Brown Whelan lowered its rating on Microsoft shares to "buy" from "strong buy." In a research note, the firm cited "investor uncertainty" from the ruling but noted that no actions can be taken against Microsoft until all appeals are complete - which may be well into 2002 or 2003.
"Until then, Microsoft will pursue their business interests as forcefully as ever. Buy on weakness, with an expected rebound as investors begin to anticipate a more benign outcome," the firm said.
Goldman, Sachs said it was keeping Microsoft on its recommended list of stocks, even though it noted the stock is likely to come under near-term pressure due to the uncertainty raised by Judge Jackson's ruling, which the investment firm described as a "rout" in a research note.
"We believe investors will need to hunker down for a potentially long process, possibly leading through appeal into 2001," Goldman's analyst, Rick Sherlund said. "The potential for third-party antitrust suits seeking damages could be a more tangible negative, attempting to leverage off of the Judge's findings."
PaineWebber also reiterated its "buy" rating on the stock, and said a settlement appears remote since Microsoft's strategy to date has been to appeal, and has won twice doing so in the antitrust case.
In a written synopsis of its morning meeting, the company said it believes that Judge Jackson's two tenets - that Microsoft's browser and operating system are separate products, and that the software maker hurt the consumer - are "both wrong and the core of the appeal."
But it added that "(m)ost of the potential remedies do not look that bad to us, including a breakup of the company, but the free licensing of Windows is troublesome."
Salomon Smith Barney continues to rate Microsoft a "buy" - the firm's highest recommendation. Weakness in the stock is a buying opportunity, the firm noted in a research note, and while it was surprised by the judge's "almost universally negative view," it continues to believe Microsoft is likely to win on appeal and that a breakup of the company is unlikely.
It added that the likelihood of a negotiated settlement has improved markedly now that it is clear where the judge stands, a move it said could boost share price.
Salomon further noted that by the time the case is resolved several years from now, "the technology market may have changed enough to render the case insignificant."
Lehman Brothers and Banc of America Securities both reiterated their "buy" ratings on the stock. Lehman analyst Michael Stanek, who noted an out-of-court settlement was unlikely, said in a research note the "near-term dust will have to settle, but (the) company's fundamentals do not change and remain intact."
Wall Street's consensus opinion on Microsoft appeared to be in line with investors who responded Monday to CNNfn's "In the Money" poll. By a margin of two to one, respondents said Microsoft investors should not sell their holdings.
|
|
|
|
|
 |
|
