More than £49bn was wiped from the value of Microsoft in just a few hours yesterday as the world's biggest software company prepared for a harsh legal ruling in its landmark anti-monopoly battle with the US government.
Its shares in fell by 15% soon after Wall Street opened, following the breakdown of settlement talks between the Seattle-based company and the justice department at the weekend.
This failure opened the way for Judge Thomas Penfield Jackson to deliver his ruling on whether the company had broken US anti-trust laws designed to protect consumers.
Even Microsoft's lawyers expected him to rule against the company after his preliminary findings last November that it had harmed consumers and abused its monopoly position. Judge Jackson's ruling is expected to fuel more than 100 individual lawsuits already filed against Microsoft.
They allege that the company overcharged them in selling its Windows software, used on more than 90%of the world's computers. Damages from such lawsuits can be punitive and, amid continued uncertainty about future sanctions, terrified investors yesterday.
Microsoft's plunge dragged down other hi-tech companies. The Nasdaq index, the world's leading benchmark for the technology sector, fell by 5% in a morning. At one stage, the effect was such that the manufacturing company General Electric was larger in market value than Microsoft or Cisco, the company that supplies much of the internet's technology backbone.
Microsoft, founded by Bill Gates, the world's richest man, pledged to appeal against any negative ruling.
Settlement talks broke down over the failure to agree on an effective remedy. Several of the 19 US states that brought the landmark legal action against the company two years ago believe that a break-up may be the only way of preventing future abuses.
Microsoft chairman Bill Gates two weeks ago sent a detailed settlement proposal of almost a dozen pages to government lawyers. In it were several key concessions. Microsoft agreed to sell a version of Windows that does not have its web browser, Internet Explorer, bundled up its operating system; open its Windows code up to other programmers; and sell Windows at a standard price. But the government rejected the offer, deriding it as "inadequate".
Several Wall Street analysts sought to ease investor fears yesterday. Rick Sherlund, an influential company analyst at Goldman Sachs, the investment bank, warned investors that they would need to have a "thick skin" to deal with the fallout from yesterday's ruling and the break-down in talks.
