Fund firms cut Microsoft holdings

By : |August 24, 2000 0

BOSTON: Many of the biggest mutual fund families, including Fidelity Investments, Janus Capital and Putnam Investments, cut their holdings in Microsoft sharply in the second quarter, according to recent regulatory filings. Fidelity cut its holdings by 36 per cent – to 119 million shares from 185 million – as the software maker was hit with a federal court decision that the company had abused its monopoly power in the software market and should be broken up.

“It’s got to be a reflection of concern from their protracted litigation, that there was no settlement or relief,” said fund industry consultant Geoff Bobroff. Janus chopped its holdings by 47 per cent – to 18.1 million shares from 38.7 million shares – and Putnam lowered its holdings by 14 per cent – to 48.4 million from 56.5 million.

Other big sellers included American Century, T. Rowe Price, Oppenheimer Funds and AIM Management Group, all top-20 fund complexes, ranked by assets according to fund data firm Financial Research Corp in Boston. Bankers Trust, American Express Financial Advisors and Goldman Sachs also sold shares. The data was compiled by financial data firm First Call Sharewatch, a unit of Thomson Financial.

The sell-off took place during a general shakeout in technology shares in the second quarter, and other large fund firms added to their holdings of Microsoft. It is also likely that individual funds added Microsoft shares even as fund companies overall showed a reduction. Still, Microsoft appears to have been singled out for particularly harsh treatment by some of the biggest fund families.

In contrast, Cisco Systems Inc., another technology bellwether, fared much better. Putnam, Fidelity, T. Rowe Price, AIM and Oppenheimer all added shares over the same period. Of this group only American Century and Janus lightened their holdings.

EMC Corp., another very widely held technology stock, also received more favourable treatment, with Janus, Putnam, AIM, T. Rowe and Oppenheimer all boosting their holdings. Fidelity and American Century cut their holdings in EMC, but not to the same extent as Microsoft.

“They don’t have (US Attorney General) Janet Reno on their case,” said Louis Harvey, president of fund data firm Dalbar. “Microsoft was not only the trigger of the technology sell-off but also the most injured party in the equation.”

Bobroff said the sell-off by institutional holders of Microsoft matched behaviour during anti-trust cases against telephone firm AT&T Corp. and computer giant International Business Machines Corporation. “If we go back and look at the AT&T and IBM anti-trust cases, for many years after the decisions their stocks were in the dog house. I am surprised that it took a court decision (in the Microsoft case) to make people take note”. The share was trading at 70-5/8 on Wednesday, well off its 12-month high of 119-15/16.

Because of the delay in regulatory filings, it is not possible to determine from documents whether this trend reversed in the third quarter. Only one of the companies, T. Rowe Price, was willing to comment on their Microsoft holdings. “On balance, we have added somewhat to our position since the end of the second quarter,” said T. Rowe Price spokesman Steven Norwitz. He declined to give details.

(C) Reuters Limited 2000.

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