Nasdaq takes record hit in wake of Microsoft ruling

MS shares drop 14%, causing market plunge

NEW YORK — A federal judge’s ruling late in the day that Microsoft had indeed violated antitrust laws helped drive the Nasdaq lower Monday.

Judge Thomas Penfield Jackson, as expected, blasted the software giant for what he found was its monopoly on computer operating systems and attempts to dominate the market in Internet browsers. In a strongly worded opinion, Jackson called the company “predatory,” and said its practices “did violence to the democratic process.”

Microsoft CEO Steve Ballmer insisted, “Our passion for being the best has been misinterpreted.” The company has said it practices hard-hitting but fair competition and never violated antitrust laws.

The ruling wasn’t a surprise after Microsoft’s settlement talks with the Dept. of Justice fell through over the weekend after four months. Judge Richard Posner, a mediator between Microsoft and the Dept. of Justice, decided the talks should end, since the parties were too far apart on the issues.

The breakdown prompted Microsoft shares to plummet 14.5%, or $15.38, Monday, closing at $90.87. Chairman Bill Gates’ stock alone lost $11 billion of value. The Microsoft drop plus a continued selloff in Nasdaq tech issues drove that market down 349 points — its worst point loss ever in a single day of trading, and its fifth-largest percentage drop.

Microsoft’s punishment will be determined after additional hearings. Possible remedies that have been bandied about include Microsoft being heavily regulated or even split up into separate companies, a move one Microsoft attorney said would be counterproductive.

“Government regulation of software product design would surely slow innovation and harm consumers,” said Microsoft general counsel Bill Neukom.

A breakup of the company would be a dramatic move and is considered rather unlikely. If it does happen, however, Wall Streeters see the company’s consumer business as a terrific merger partner for a big media and entertainment company.

Meanwhile, Microsoft will certainly contest the decision. Neukom said that once the penalties are assessed, sometime in the next several months, Microsoft would launch its appeal. He expects the appeals court to take up the case on an expedited basis and issue a ruling within a year.

During a press conference after the ruling, Gates claimed the company “went the extra mile” during mediation talks and tried to be flexible. But it “became clear as the process went on that at least some of the parties were not at all open to a settlement.”

Several of those other parties denied Gates’ assertion.

The federal government, along with 19 individual states’ attorneys general, had filed suit against Microsoft. Legally branding the company a monopoly is likely to fire additional lawsuits.

Assistant attorney general Joel Klein said at a press conference that the ruling shows “No company, no matter how powerful and how successful, can refuse to play by the rules.”

Despite the stock’s rout on Monday, Microsoft’s Ballmer said the focus of the company has always been on the long-term. He added that Microsoft would address financial concerns of its employees, many of whom have substantial personal wealth tied up in Microsoft stock or stock options.

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