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Wall Street Shows Confidence In Microsoft Despite Finding

By Charles Piller
LOS ANGELES TIMES -- SAN FRANCISCO

Wall Street gave Microsoft Corp. a vote of confidence Monday, the first trading day after U.S. District Judge Thomas Penfield Jackson lambasted the company’s business practices as monopolistic and predatory. The company’s shares dropped as much as $7.18 in early trading, but rallied to close at $89.94, down only $1.63, in heavy trading on NASDAQ.

Some market watchers had expected a much larger drop -- on the order of 5 percent to 10 percent -- to go along with substantial gains by the software giant’s chief competitors.

The stinging condemnation contained Friday in Jackson’s findings of fact in the antitrust trial -- and the likelihood the judge will rule that the Redmond, Wash.-based company violated the Sherman Antitrust Act -- led to fears that uncertainty about Microsoft’s future could disrupt the high-tech market.

The company faces formidable challenges in a range of areas, including e-commerce and the race to supply software for Internet-connected appliances, such as hand-held computers, cable TV boxes and cellular phones. Meanwhile, it faces rising popularity for the insurgent computer operating system Linux, a competitor to Windows. Some industry watchers expected the judge’s ruling to stimulate investors to decrease their Microsoft holdings substantially.

But the modest drop in Microsoft shares suggests that investors expect the company’s to navigate its antitrust minefield effectively, at least in the short run.

Some analysts view the company’s legal position as stronger than the media and competitors have suggested. If Microsoft secures an out-of-court settlement, its share price could benefit. If not, the legal proceedings could drag on for years with little in the way of immediate effects. And in the long run, Microsoft could still win the case on appeal, they say.

However, in the wake of Jackson’s ruling, a few Microsoft competitors posted spectacular gains -- including Red Hat Inc., the largest provider of the Linux operating system, which many analysts believe could seize a major share of the operating-system market in years to come.