One might expect that the government's antitrust actions against Microsoft would have affected the values of other computer firms. In particular, direct competitors such as Netscape and Sun should be made better off, whereas firms selling complementary products such as Dell and Compaq would be made worse off. A study of the stock price movements of 159 computer-related firms surrounding major news announcements of antitrust actions against Microsoft from March 1991 to December 1997 yields some interesting findings. These 159 computer firms (excluding Microsoft) had a total stock market value of $754 billion in December 1997. This group experienced an aggregate drop in stock value of $35 billion on the three days surrounding the 29 news announcements that increased the antitrust enforcement against Microsoft. Conversely, when antitrust news favorable to Microsoft was announced, these firms' value increased $70 billion. Negative (positive) movements of Microsoft stock at the time of antitrust enforcement actions coincide with negative (positive) returns for the industry. Notice that the 159 computer firms include those firms supposedly wanting the government antitrust suit to succeed. Surprisingly, there is no evidence that individual firms such as Netscape, Sun, Novell, or Apple realized higher stock returns when antitrust actions were taken against Microsoft. Repeated antitrust actions against Microsoft have not increased the expected earnings of other computer firms. "Surprisingly, government action against Microsoft appears to inflict capital losses on the computer sector as a whole. . . . Withdrawals from policy enforcement have been accompanied by positive shareholder returns throughout the computer sector."

Sun, Netscape, and Apple have encouraged the government to pursue its antitrust suit against Microsoft; California, where these firms are headquartered, has joined the suit; yet Bittlingmayer and Hazlett (2000) JFE find no evidence that these firms realize higher stock returns when antitrust actions are taken against Microsoft. How might you explain these facts?