Cohen: Whether Consumers Have Been Harmed is Larger Issue in Microsoft Antitrust Case
DEBORAH MARCHINI, CNN ANCHOR: The markets traded in diametrically different directions Monday. Now we'll get an expert's analysis of what it means.</s>DAVID HAFFENREFFER, CNN ANCHOR: And joining us is technology analyst Jonathan Cohen of Wit Soundview. We'll, of course, be asking him about Microsoft following Judge Jackson's ruling, what it could mean for the tech industry, and if this is a good time to be shifting tech holdings into your portfolio. Welcome to</s>AHEAD OF THE CURVE. JONATHAN COHEN, WIT SOUNDVIEW: Thanks very much.</s>HAFFENREFFER: Dramatic day yesterday.</s>COHEN: Much drama.</s>HAFFENREFFER: Did we hear anything out of the judge that we didn't already know?</s>COHEN: Not really. I mean, the decision, I think, was widely anticipated. Microsoft themselves almost broadcast that they were prepared for something like this, which is to say, basically, a guilty verdict, although, obviously, that wasn't the nature of the decision. But, essentially, Judge Jackson said that, yes, Microsoft is guilty of a type of behavior by a monopolist that is in violation of U.S. antitrust laws. So there's no doubt that the decision went against Microsoft, but I think that was also pretty widely anticipated.</s>MARCHINI: Do you think the judge is right?</s>COHEN: I don't know if the judge is right or not. I mean, the letter of the law is being interpreted by the court in a very specific way. The larger issue, though, I think is almost the more interesting issue, which is: Have consumers been harmed? Has Microsoft's behavior actually harmed consumers as, for example, Janet Reno talked about yesterday in the press conference. I don't know if consumers have been harmed. But at the same time, I'm not aware of any other industry in the history of commerce in which prices have fallen so dramatically, performance has increased so rapidly. Consumers today can buy a personal computer with Microsoft software on it for about $500 or $600 that does everything and performs just as powerfully as a computer that literally would have cost millions of dollars a decade or so ago. So it's hard for me to think of how consumers have been harmed, but clearly that's the U.S. Justice Department's contention.</s>HAFFENREFFER: If the decision was widely expected by Wall Street, why a more than 15-point decline in the company shares?</s>COHEN: I think that the decision was anticipated, but I also think that the magnitude of the sentiment against Microsoft in the judge's opinion was maybe not anticipated. Furthermore, I think that, you know, Wall Street was happy to sort of monitor the trial, monitor the decision, see what happened. But yesterday was an event, and Wall Street responded to the immediacy of that event.</s>MARCHINI: How much did Microsoft have to do with yesterday's massive sell-off in the Nasdaq and rally in the old-line old-economy stocks that make up the Dow?</s>COHEN: I think it was the most important catalyst. I mean, clearly, if you think about all the fundamental implications, the business implications of this decision for other technology companies, it's really not very important. I mean, if you think about Internet companies, if you think about other software companies and hardware companies and networking equipment stocks, all of the companies that went down so dramatically yesterday, this decision really doesn't mean anything at all for most of them, or for any of them. So on a fundamental performance basis, none of this is terribly important. On a valuation psychology basis, it's much more important, and I think Microsoft's -- the decision against Microsoft yesterday, the pending decision and the decline of the share price, was absolutely the catalyst for the sell-off to the extent that these stocks are all -- these companies all may do very, very well over the next year. I think there may be buying opportunities in here.</s>HAFFENREFFER: The company shares at 90 7/8. When should we start piling money back into the shares?</s>COHEN: I think for investors that don't have positions in Microsoft, that have been standing on the sidelines waiting to take advantage of a break in the price, this may be that opportunity. This may be that break. At the same time, we're not recommending that investors pile in because there is clearly litigation risk that's not going away anytime soon. The appeals process could very easily take two years. That could work in Microsoft's favor, but at the same time, the risk is not going away.</s>MARCHINI: Briefly Jonathan, any major bargains created in yesterday's Nasdaq sell-off?</s>COHEN: We're looking at names like America Online, Priceline, really the blue chips of the Internet space which have sold off dramatically from their highs. We're looking at Web-hosting companies, for example, like Verio, which is off now more than 30 or 35 percent from its high easily, and which is a great company, a great space with great prospects. This is all valuation related. None of this is fundamental, and we would be selective buyers at these prices for a number of names.</s>MARCHINI: Fascinating analysis. Jonathan Cohen, Wit Soundview, thanks a lot.</s>COHEN: Thanks very much. Search CNN.com CNNSI.com CNNmoney.com The Web