MS plunges on Wall Street amidst break-up reports

Microsoft shareholders experienced one of the worst days in the history of

the software company’s publicly traded stock. Reports of slowing PC sales,

lower Microsoft revenue projections and strong indications of the U.S.

government in asking for a break-up of the software giant, sent Microsoft shares

tumbling 16 per cent, losing more than $65 billion in value in a single day.

Just how bad have things been for Microsoft lately? The next time someone is

asked ‘Who is the richest man in the world’ on the globally popular TV show

"Who Wants To Be A Millionaire," "Bill Bates" better not be

that person’s final answer. As Gates’ fortune tumbled to $49 billion, from

$100 billion a few months ago, Oracle chief Larry Ellison was only $1 billion

behind Gates at the end of Monday’s trading session on Wall Street. For a few

brief moments, Ellison actually was the world’s richest man when Microsoft

shares traded down as much as 18% at the mid-day point, while Oracle shares were

up another $2 a share.

The sell-off involved some 157 million shares of Microsoft stock, the third

highest in a single day. It started when Microsoft’s Chief Financial Officer

cautioned on Friday ­ when markets were closed -- that the company’s sales

may be lower than the previous year’s sales during the next 4 or so quarters.

That report sent Microsoft shares down sharply from the opening bell. Later in

the morning, International Data Corp and Dataquest said their latest surveys

show PC sales grew less than expected in the first quarter.

And by lunch time, reports were spreading fast that the government is

planning to ask this week for a break-up of Microsoft. Microsoft shares finished

off more than 412 a share to just $66. Bill Gates alone lost $9.1 billion in the

value of his shares. Under the government’s reported proposal, Microsoft would

be forced to spin off most of the applications group, including the Office

product section, which accounts for 45 percent of Microsoft’s sales. The

government will also ask for severe restrictions on the Microsoft’s business

relationships with ISP and computer makers. The restrictions include requiring

Microsoft to charge all computer makers the same price for Windows OS products,

publish the API source codes that enable applications programmers to write

software programs that run on Windows, prohibit Microsoft from raising the price

of older products after a newer version has been introduced into the market and

a tactic designed to force customers to adopt the latest technologies.

Those restrictions would go into effect immediately on a temporary injunction

basis and will stay in effect throughout the appeals process, but will be lifted

if a break-up is approved and put into effect. The government has reportedly

concluded that the most effective way to prevent Microsoft from further

anti-competitive tactics is to break it apart. What appears to have pushed the

government towards a break-up is the continued defiant attitude of Microsoft and

its refusal to admit any wrongdoing in the face of a mountain of evidence to the

contrary. Just last week, CEO Stave Ballmer said his company had done nothing

wrong except perhaps "be rude to competitors."

Microsoft official immediately denounced the reports of an imminent break-up

proposal as "radical and extreme government regulation of the high-tech

industry. There is certainly nothing in this case or in the judge's ruling that

would justify such excessive actions as we are now seeing the government talk

about," said Microsoft spokesman Mark Murray. "A breakup simply doesn't

match what we have seen in the trial. We have seen no evidence of consumer

harm," added Microsoft's chief operating officer Robert Herbold.