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David D. Kirkpatrick and Jamie Heller

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from: Jamie Heller

MSFT: It's Not Over Till the Three Judges Sing

Posted Thursday, May 25, 2000, at 11:11 AM ET

David,

I'll take you up on your offer to move on from dot-coms to Microsoft.

It's all about the appeal now, which, thanks to yesterday's news, will apparently be soon. Microsoft has a more than fighting chance.

Let's start with the judge. Microsoft prevailed at the appeals court on related issues way back, with the higher court reversing Judge Jackson. That shows that the appeals court will be willing to thoroughly question this judge's work and won't show him deference just because the decision bears his name.

Second, Judge Jackson back in November issued a scathing "findings of fact" that basically sealed Microsoft's fate in his hands. It's extremely hard for appeals courts to overrule a district court on factual findings, on the theory that the trial court is closer to the details and better positioned to make a judgment. Generally an appeals court can only overrule findings of fact that are "clearly erroneous."

At first blush, it seems that this procedural posture would weigh in the government's favor. But it's possible that the D.C. Circuit might be a touch suspicious, and in turn resentful, that the district tried to tie the appeals court's hands by issuing such a sweeping factual ruling.

Third, at least back in the mid-'90s (I haven't followed it closely since) the D.C. Circuit appeals court was relatively "conservative," which suggests it would be loath to affirm such an extreme anti-business/pro-government remedy as a breakup. Much will depend on the specific three-judge panel assigned to the case.

Finally, the whole aura feels like too much fanfare, not enough facts. Sure, Microsoft was arrogant and brought on a lot of its own woes. But those AGs were media sluts, pardon the vernacular. Hopefully, in the more removed court of appeals, the issues will get heard unfettered.

BTW: I'm not sure how a reversal would play for the stock. As the market is said to love certainty, it might favor closure in the form of a legal affirmance and corporate breakup over a reversal that included continued litigation.

Jamie

the breakfast table
entries
123456789101112131415161718
from: Jamie Heller

MSFT: It's Not Over Till the Three Judges Sing

Posted Thursday, May 25, 2000, at 11:11 AM ET
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David D. Kirkpatrick is a contributing editor at New York magazine who writes frequently about business and finance. Jamie Heller is editor for strategic ventures at TheStreet.com, where she's worked since its 1996 founding.
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Reader Response from The Fray--to be read after the most recent entry:


I still don't understand how the stock market can be efficient in the long term and not the short run. And I'm not relying merely on Keynes' famous sentiments about the long run; my point is even simpler: when is the long run? Was Microsoft's long run value from 1990 to early 2000 or to today? Short run volatility must have consequences for people who claim long run efficiency. To my mind, and for many other reasons, believing in efficient markets is like believing in Santa Claus--there are correlations between expected results and reality, but people really ought to grow up and accept that no-one on Wall Street knows anything.

--Jeff

(To reply, click here.)

(5/22)

To Jeff: Various natural processes are long-term efficient without being short-term efficient, for example the downhill flow of water or the process of natural selection (aka evolution). Complex human processes seem to have similar behavior. Perhaps efficient is being confused with "optimal". The problem with most strategies that attempt to be optimal is that they often have truly horrendous failure cases, which wipe out all their interim or theoretical gains. Democracy has been called "the worst form of government, except for all the rest." It is hardly optimal, and in many cases very inefficient. A dictator could get the graffiti cleaned up and the trains running on time; democracy seems to have a hard time doing such things. But what about the failure case of a less-than-benign dictator or a dictator whose benign intentions diverge from many or most of the desires of the population? An example of short-term efficiency vs. long-term, in terms of human happiness.

That's not to say short-term efficiency is bad, or that we can't improve on raw systems. But it is possible for a strategy to be the best long-term one without exhibiting short-term efficiency.

--Paul Canniff

(To reply, click here.)

(5/23)

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