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Rumours that a US government proposal due Friday will urge breaking Micro$oft into at least two divisions led analysts to downgrade their buy recommendations and took a hefty chunk out of M$ market cap in Monday morning trading on Wall Street. The Washington Post and USA Today have both reported in their Monday editions that a US Department of Justice plan backed by nineteen states would cleave the Windows OS division from the rest of Micro$oft. The remaining core company might then be subdivided into two, one handling applications software and the other Internet business, including browser software. Furthermore, the company's revenue growth recovery estimates have been trimmed from 20 percent to a more modest 15 percent, largely on news of less than stellar Q3 earnings. (In a companion story The Register explains why these expectations are extravagant.) "We expect the slide to continue this week following a disappointing earnings release and the company's first forecast guidance on estimates in memory," Merrill Lynch analyst Christopher Shilakes reported Monday morning. With that -- and it's not much when you look at the company's 52-week performance -- the influential Goldman Sachs lowered its buy recommendation, and frantic trading commenced with 42 million shares changing sweaty hands in early morning trading alone. Micro$oft has slid from a one-year high of nearly $120 per share to Thursday's closing price of $78.94 for a 42 percent loss, yielding a $240 billion reduction in market cap. While revenues are up rather nicely on the year, the company is now haemorrhaging money in the current Wall Street carnage, and this has got investors spooked. Shares dove $11.94 to $67 for an additional loss of 15 percent in early trading Monday, leaving the company ranked number three behind General Electric and Cisco Systems. The news, which is hardly news, inspired another irrational sell-off on the NASDAQ, which slid nearly 200 points by midday, though most dotcoms have been posting better than expected Q3 earnings. Their share recoveries remain hampered by superstitions surrounding the troubles in Redmond, which are inexplicably assumed to bode ill for the entire industry. We can see the tunnel-vision, zero-sum mentality on Wall Street most clearly when we consider that amid the overall NASDAQ pounding, only Micro$oft's most direct competitors appear to be gaining. Red Hat gained $3.13 or 12 percent; VA Linux $4.59 or 12 percent; and Caldera Systems 88 cents or eight percent. ®

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