Let The Lead Dog Lead
Remember
the children’s nursery rhyme about Humpty Dumpty (i.e., the Nasdaq)
who sat on a wall and had a great fall and how all the king’s horses and all the
king’s men couldn’t put Humpty together again? Well, that story came to mind
this week after news broke that the Department of Justice would no longer pursue
its break-up strategy against Microsoft.
Our economy is severely broken,
and since tech plays such an important role in our economy’s growth engine, it
was great to see our government finally make a decision that would build up
rather than tear down technology stock prices. Between the Microsoft case,
Greenspan targeting stock prices in 2000, and a horribly unsuccessful telecom
act of 1996, it’s a wonder that we are not at Nasdaq 1000 and reading by
candlelight. Hats off to the DOJ and the decision to lighten up on Microsoft!
The Bush Administration
probably played a role in the calling off the DOJ attack dogs, and the decision
to do so is smart, both economically and politically. Few economists anticipated
the speed and severity of our recent economic collapse, and you can rest assured
that with congressional races just a little more than a year away, all the
currently elected king’s horses and men will do all they can to get the economy
running again.
As we all remember, the
Nasdaq’s great fall began in earnest in April 2000, at the exact same time as
the government’s ill-fated decision to “break-up” Microsoft. Not even
Microsoft’s staunchest critics and competitors could have imagined what carnage
would follow in techland. Here we are a year-and-a-half later and the Nasdaq is
more than 60% off its high, telecom has collapsed, and the broadband revolution
that was supposed to change the world has been stopped in its tracks.
In the future, government
officials and policy makers will look back on the Microsoft case and remember a
clear lesson: Never ever go after your strongest company, the company that
serves as the backbone of
your economy. In other words, it is usually best to let your lead dog lead.
The Microsoft saga was
obviously not the main cause of the collapse, but it most definitely eroded
confidence levels among tech executives and investors alike. It has also hung
over the tech landscape like a big dark cloud, since Microsoft’s operating
system is at the center of technology’s engine. I wonder how many new
innovations and products have remained on hold throughout this long, drawn-out
process.
Bill Gates now has a choice
whether to settle with the government or continue to fight. Microsoft’s stock has held
up spectacularly compared to the rest of tech, so maybe the soldiers from
Redmond will fight on. It would probably be best for tech for Microsoft to
settle and let the government save a little face. With the launch of Windows XP
taking place in late October, Microsoft can ill afford more bad press or delays.
Intel’s Pentium 4 success is
also tied to the XP rollout, as are Dell, Compaq, Gateway and everyone else for
that matter. So with tech still in such a wreck, at least this week offered some
slightly positive news. Intel saying that this quarter will likely meet
expectations was also a plus for tech this week and probably helped keep the
Nasdaq’s loss Friday to a minimum.
As for all the king’s horses
and all the king’s men, Congress and the President should look at scrapping the
Telecom Act of 1996 and instituting competition for broadband and wireless
services. The fiber optic cables are in place worldwide, but still less than 5%
of homes in the U.S. have broadband access. The so-called “last mile”
problem must be solved before we get the next big wave in tech. Sadly, the
leadership will have to come from Washington, but for now, that is tech’s only
place to look for help.