WASHINGTON -- District Court Judge Thomas Penfield Jackson will rule at 5 p.m. EDT Monday on whether Microsoft violated the nation's antitrust laws, the court announced on Monday. Microsoft (MSFT) shares plunged more than 10 percent, dragging its value down by $72 billion, after its efforts to settle the U.S. government's antitrust case against it broke down, clouding the software giant's future.
Microsoft opened the day down 11 percent, and fell 15, or 14 percent, to 91-1/4 by early afternoon on the Nasdaq. Trading was frenzied, with 92.5 million shares trading hands, compared with average daily volume of about 35 million shares.
However, most Wall Street analysts said the fall -- one of the biggest single-day drops ever for the world's biggest software company -- was seen as a buying opportunity by some investors. Analysts cited a strong product line-up and the expectation of a lengthy appeals process in the case.
The fall was triggered by news on Saturday that a private mediator had given up his efforts to strike a settlement between Microsoft and the U.S. Justice Department, which alleges the company used its monopoly power in PC operating systems to harm rivals and consumers.
Early on Monday, Judge Thomas Penfield Jackson, who is presiding over the case brought by Justice and 19 states, said he would issue his final ruling on whether Microsoft broke antitrust law on Monday afternoon at 5:00 p.m. EDT (2100 GMT).
That decision is widely expected to find Microsoft did break the law, and Jackson will then move on to deciding penalties against the company. A guilty ruling will also open the gates to a flood of civil lawsuits by companies claiming they were harmed by Microsoft.
At least one Microsoft analyst found the developments disturbing enough to downgrade the company's stock to a "hold" from a "buy."
"We regard Microsoft's loss to be a foregone conclusion, which subjects it to damages that will likely be undetermined for a period of months," Melissa Eisenstat with CIBC World Markets said in a brief research note.
The case has weighed heavily on Microsoft shares since Jackson found in a preliminary ruling late last year that the company broke antitrust law.
Microsoft spiked to nearly $120 a share at the launch of Windows 2000, its industrial-strength operating system in February, but has mostly hovered around the 100 range for months.
With about 5.2 billion shares outstanding, the market capitalization of Microsoft, which was the world's most valuable company less than two weeks ago, stood at $468 billion, well behind No. 1 Cisco Systems, which was worth about $540 billion.
But most Microsoft watchers reiterated "buy" or "strong buy" ratings on the company, saying sales of Windows 2000, its new flagship computer operating system, appeared robust and that final legal action against it was far down the road.
"After a recent period of slowing growth and difficult comparisons, the company is about to launch a major new product cycle around Windows 2000," said SG Cowen analyst Drew Brosseau, who put a $140 price target on Microsoft shares.
Andrew Roskill, an analyst with Warburg Dillon Read LLC, said he expected the stock to fall further after the expected harsh ruling from Judge Jackson, but that long-term prospects for the company were still bright.
"We would point out that while the case will likely remain somewhat of a dark cloud over the shares, Microsoft's stock has significantly underperformed the large-cap tech gorillas over the last six months, and is currently trading at an attractive relative valuation," Roskill said.
"Investors willing to ride out the litigation issue and focus on the fundamentals associated with the coming new product cycles will likely find an opportunistic buying opportunity today," Roskill said.
Rick Sherlund, a Goldman Sachs analyst who is one of the most respected Microsoft authorities, said the company was a solid long-term investment and that he did not expect a harsh punishment like splitting up the company.
"I'm not sure that there's very widespread support to try to break the company up, that's a very extreme remedy, and I suspect a remedy more targeted at changing some of Microsoft's behavior in some of these areas that the courts object to might be sufficient," Sherlund told CNBC financial television.
"I don't think pulling a buy rating today, with the stock down 14 points does anyone any good. I think that you probably just have to be patient, the worst of the point-drop is probably over," Sherlund said. "The lawsuit will be kind of a backburner issue as we move into the second half of the year."
Among other analyst notes, George Godfrey of ING Barings reiterated a "strong buy" on Microsoft while Chris Shilakes of Merrill Lynch said the failure of negotiations was a "modest negative" for the stock and that Windows 2000 and a shift to business computing were "critical long-term investment drivers."
