The New Jersey Division of Investment snared about $200 million in gains by selling Microsoft Corp. shares in the months before Judge Penfield Jackson ruled the Redmond, Wash., company wielded "monopoly power" in the software industry.
Still, New Jersey officials and those at other pension funds and money management firms remain more bullish than not on Microsoft.
That doesn't mean some investors don't have their qualms.
The $76 billion Division of Investment, Trenton, is more concerned "about other tech companies and the valuation of (Microsoft) than the Justice Department ruling," said Brian Arena, portfolio manager and technology analyst.
Microsoft's price/earnings ratio recently has been in the heady neighborhood of 60-to-1. Its market capitalization is a whopping $470 billion.
The New Jersey division, which still owns about $1.8 billion in Microsoft stock, began buying it in 1989; the stock is New Jersey's largest holding. Because of stock splits and the like, its average cost per share is a little more than $1. Microsoft closed at 89 5/8 Nov. 11.
Many investors look to the Redmond, Wash.-based computer software giant to continue dominating the software business and stock market indexes.
Some, however, are a little bit leery.
"The ruling is coming at a time when Microsoft is losing control over operating systems and office suites," two of its core lines of business, said Neil Toth, investment officer and assistant director at the $54 billion Public Employees' Retirement System of Ohio in Columbus.
The Ohio fund owns almost $500 million worth of Microsoft shares; the company is the largest holding in Ohio's portfolio.
Ohio owns a market weight of Microsoft in its passive portfolio, which is pegged to the Standard & Poor's Super Composite index, he said. It has underweighted the stock in its active portfolios.
Advances in technology, particularly on-line, could hurt the company, Mr. Toth said. "The Internet is taking away control of the market over these two areas."
Operating systems like Linux, offered free over the Internet, could threaten Windows, with licensing costs of $100 per user, he said.
"Will the Internet be the operating system?" Mr. Toth asked.
Many money managers, on the other hand, are more sanguine about Microsoft's continued dominance.
"I think that fundamentally, Microsoft is very strong. They have two major product cycles just starting up -- Office 2000 and Windows 2000," said Michael R. Tucker, senior investment analyst at Federated Investors, Pittsburgh.
"If anything, we're more positive on Microsoft now. The stock didn't fall as much as I thought it would. I was waiting for a buying opportunity," Mr. Tucker said.
Overall, Federated owns 1.7 million shares of Microsoft.
Alan Loewenstein, co-portfolio manager of the $1.2 billion John Hancock Global Technology Fund, has been buying Microsoft steadily over the last few months when the share price has been in the high $80 to low $90 range. If the share price hits $80, he predicted a buying frenzy, based on many tech analysts' recommendations.
Mr. Loewenstein also likes Microsoft's fundamental solidity. "Microsoft beat all the analysts' earnings expectations for the quarter ended in June, again in the quarter ended in September and has had to revise its numbers upward for the December quarter. Business is extremely good."
"We remain very positive on Microsoft," he said.
Mr. Loewenstein said Microsoft is among his fund's top five holdings, although he declined to say how many shares he owns.
As the world awaits word of a settlement between the Justice Department and Microsoft, Kent Shepherd, a portfolio manager at Franklin Advisers Inc., is "making an inherent bet that Microsoft management is capable of managing the settlement process satisfactorily."
Mr. Shepherd manages the $360 million Franklin Value Mark Capital Growth Fund, and Microsoft is one of his top five holdings.
Rather than break up the company, Mr. Shepherd said, Microsoft could agree to change its business practices.
For example, Microsoft might continue to offer both its operating system and network software together, but also offer other vendors' products as part of the package.
Mr. Shepherd noted any agreement Microsoft makes "will be a closely scrutinized process, and therefore it is unlikely they will just try to pay lip service. They'll have to make real changes to company practices."
Overall, Franklin Resources Inc., the parent company, on Nov. 9 held 615,000 shares or roughly $55 million worth of Microsoft.
But Banc One Investment Advisers, Columbus, Ohio, moved Microsoft off its "buy" list two weeks before the court ruling in anticipation of a negative ruling.
Banc One managers, who collectively owned 25.2 million shares or more than $2.2 billion worth of Microsoft Nov. 9, aren't reducing their holdings now, said Rick Jandrain, chief investment officer.
But they haven't seen reasons to move Microsoft back onto their buy lists, Mr. Jandrain noted.
