Being a loser is always a bad thing.
But on Wall Street, often the anticipation of defeat is worse than defeat itself.
That's the investor logic that analysts expect will apply to Microsoft (MSFT), whose shares took a painful dive Monday on expectations of a decidedly negative antitrust ruling from U.S. Judge Thomas Penfield Jackson.
Shares of the software company plummeted 15 percent -- the largest single-day drop in recent months -- following news of a collapse in settlement talks.
Now that Jackson has actually ruled -- and his conclusions are as anti-Microsoft as everyone expected -- MS fans predict things will start looking up.
"I think it was pretty much a foregone conclusion that the judge would say they're guilty," said Brian Goodstadt, an analyst at S&P Equity Group who follows Microsoft.
Although the stock shot up over the last couple weeks in hopes of a settlement, Monday's plunge cancels out most of the gain, Goodstadt said. He said it's unlikely shares will drop sharply Tuesday.
In the final analysis, investors will judge Microsoft by its earnings, said Drew Brosseau, analyst at SG Cowen, who reiterated a strong buy rating on Microsoft Monday.
"In the long run, the stock will be based on the fundamentals, not the legal issues, and in the course of the next year to two years, the company is going to see an acceleration in its growth rate due to the Windows 2000 cycle," he said.
Not all of Wall Street was quite so confident, however. Analysts at CIBC World Markets downgraded their rating on Microsoft from buy to hold, indicating that the stock has further room to fall.
Trading in Microsoft stock was halted just before to the release of the findings. Shares resumed trading at 5:44 EDT and were trading at $90.88, down $15.75 from the morning's opening price.
Microsoft's slump contributed to a much broader downturn in technology stocks Monday. The technology-heavy Nasdaq Composite index fell 7.6 percent -- its fifth-largest percentage drop in history -- dragged down by the MS sell-off.
Monday's losses were liberally spread among software and Internet stocks, with such industry bellweathers as Yahoo, eBay, and Amazon.com taking a hit.
Linux software and services firms -- some of the companies that would seemingly stand gain the most from Microsoft's travails -- also didn't get much of a boost on Wall Street. Shares of Red Hat Software (RHAT) dropped a quarter of a point, while VA Linux (LNUX)stock rose about 3 percent.
Even Oracle (ORCL)and Sun Microsystems (SUNW), both long-standing Microsoft critics, saw stock prices skid. Sun fell 4 percent to $89.81, while Oracle slipped 1.5 percent to $76.88.
All in all, it was a pretty miserable day for the majority of tech stocks.
The best investors can hope for now is that the reality of Microsoft's defeat is less brutal than its anticipation.
What's more, this was just round one of the antitrust trial. Microsoft could potentially drag the case through the appeals process for years.
"We're still not near the end of this," Goodstadt said.
