Stock Watch: Reports of Breakup Rattle Microsoft

Microsoft Corp. (Nasdaq: MSFT) fell in early trading Monday, following newspaper reports that U.S. federal and state officials are leaning toward forcing a breakup of the software giant. The stock was down 11 9/16 to 67 1/8.

The Washington Post, citing “people familiar with the discussions,” said the Justice Department and 19 states may ask a court to split Microsoft into two or three separate companies. The Wall Street Journal, meanwhile, said federal enforcers favor forcing the company to sell its Office software business, which accounts for more than 40 percent of Microsoft’s revenue.

Microsoft also reported earnings late Thursday, weighing in with net income for the first quarter of $2.39 billion, or 43 cents per fully diluted share, up from $1.92 billion, or 35 cents, in the same quarter of 1999. Revenue rose to $5.7 billion from $4.6 billion.

“OEM revenue was light, as demand for business PCs remained slow in the quarter, and we remain guarded about near-term growth,” said Chief Financial Officer John Connors.

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