Microsoft Worries Slap Tech Shares
The Nasdaq fell sharply Monday as an already skittish market was unnerved by reports that the Justice Department is leaning towards recommending the breakup of Microsoft Corporation.
It was a day of nothing but losses for the Nasdaq composite index, which did manage to recover from a loss of more than 298 points, finally closing down 161.24, at 3,482.64.
It's been a cruel month for the Nasdaq, reports CBS News Correspondent Jim Axelrod, who reports that of the ten worst single day point drops in Nasdaq history, five have been this month. The drop Monday was the ninth worst.
The Dow started out on the down side, and headed down 146 points, but recovered to close up 62.05, at 10,906.10, according to preliminary figures.
The mood was established early Monday, with the Dow Jones industrial average losing 143.34 in the first few minutes of trading, slipping to 10,700.71 by 10 a.m. ET, while the Nasdaq tumbled 180.50 to 3,463.39 in the same period.
"This technology market wants to go down to correct the excesses," says Prudential Securities stock market analyst Larry Wachtel. "So if you want to use Microsoft (as the reason), be my guest...but it was going to happen anyway.
Wachtel says the numbers tell the story. "People were making 50 and 60 and 100 percent on their mutual funds. They were making 200, 300 points on individual stocks. That was nuts! We had a binge, and now we're going sober, and the world looks a lot grayer when you're sober.
Microsoft stock fell nearly $12 a share Monday, to around $66, a decline of over 15 percent. Estimates translate that drop into a $10 billion reduction, to $50 billion, in the size of Microsoft chairman Bill Gates' personal fortune. It's also a $ 72 billion slice out of the total market capitalization of the Microsoft Corporation. Microsoft stock has dropped by nearly 50 percent since December.
The Nasdaq slide came after published reports that the Justice Department may ask a federal judge to break Microsoft into two or three companies. The Microsoft stock down trend is also seen as a reaction to last week's announcement that the company expects flat sales in the current quarter.
Monday was the first day of trading since that announcement, which came with a prediction by Microsoft's chief financial officer, who predicted revenue growth of around 15 percent. That was in contrast to previous forecasts of 20 percent revenue improvement.
Microsoft Monday was quick to denounce as "extreme and radical" a reported government plan to ask the judge at the Microsoft anti-trust trial to order the breakup of the computer giant. "There is nothing in the trial record or in this case that would justify such an extreme and radical remedy," says Microsoft spokesman Jim Cullinan. "This would be bad for Microsoft, consumers and the entire industry."
Overseas, Japan's Nikkei stock average rose 1.3 percent. Stock exchanges throughout Euroe were closed Monday for the long Easter weekend.
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