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Microsoft bulls return
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June 21, 2000: 4:11 p.m. ET
Analysts say antitrust developments bring good opportunity for investors
By Staff Writer Richard Richtmyer
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NEW YORK (CNNfn) - Executives at Microsoft's Redmond, Wash., headquarters and investors on Wall Street breathed a collective sigh of relief Wednesday after a key ruling in the software giant's antitrust case took some of the pressure off its beleaguered stock.
Shares of Microsoft, which had fallen as much as 48 percent this year, took a sharp turn for the better Wednesday. Shares closed up 6-13/16, or 9 percent, at 81-3/4.
Those gains came after U.S. District Judge Thomas Penfield Jackson, the judge who presided over the case, agreed on Tuesday to postpone a series of restrictions on the company's business practices as it seeks an appeal of his order to split its business in two.
Judge Jackson also agreed to push the appeal straight through to the Supreme Court, circumventing the U.S. District Court of Appeals.
It is not certain that the Supreme Court will hear the case, and Microsoft has been pushing to have it heard in the Appeals Court, which has ruled in its favor on antitrust matters in the past.
Even so, the latest developments in the case have cleared up some of the uncertainty that had been surrounding the company in recent months and cleared the way for investors to move back in, according to analysts.
Several brokerages came out with positive comments on Microsoft Wednesday, including CIBC World Markets, which boosted its rating on the stock to "buy" from "hold."
 Though she said there still are legal risks for Microsoft moving ahead, CIBC analyst Melissa Eisenstat said the risk to the company's business has been substantially reduced with the judge's stay of the conduct restrictions.
When he issued his final judgment against Microsoft earlier this month, Jackson imposed restrictions, effective in September, on the way it does business, which he said would prevent Microsoft from abusing its monopoly power in the market for PC operating systems.
Microsoft said the restrictions would have a "devastating" effect on its business because it would have to shares its software source code with competitors, redesign all of its operating systems and comply with price controls. But with the latest decision, it's now likely to be business as usual for Microsoft, Eisenstat said.
"This essentially maintains the status quo for the foreseeable future and removes the risk that we will have to revise downward our model if the behavioral remedies had been implemented," she said in a research report.
Eisenstat also said investors are likely now to focus on the prospects of Microsoft's new Windows 2000 operating system, as well as its "Next Generation of Windows Services," which executives are taking the wraps off of this week.
"Over the next several months, we also think the company will be making multiple new product announcements as it rolls out Next Generation of Windows Services," she said. "We believe that a steady flow of these announcements will have a positive effect on the stock."
Other analysts chimed in with bullish comments on Microsoft as well. Donaldson Lufkin & Jenrette reiterated its "buy" rating, and ING Barings reiterating its "strong buy" on the stock.
William Epifano, enterprise software analyst at J.P. Morgan, also said the postponement of the conduct restrictions played in Microsoft's favor and called the stock "a great value right now."
"If you're looking at forward price-to-earnings ratio, Microsoft is under 40," Epifano said in an interview on CNNfn's Ahead of the Curve program Wednesday. "At that level, I believe this company has terrific fundamentals and things will start to come together."
Epifano also has a "buy" recommendation on Microsoft. But he noted that the rating assumes the company ultimately prevails with its appeal of Jackson's order to split in two. "If the company is split up, some way or another, it's going to be bad for shareholder value; it's going to be really destructive," he said.
As for the direction of Microsoft's shares in the immediate future: "I think at this point we're going to stay in a trading range for a while," Epifano said. "The next big catalyst for the stock is going to be Microsoft delivering some terrific Windows 2000 results, and I'm frankly not expecting that until the December quarter. So we have some time. Anything before that will be a nice upside surprise from my perspective." 
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