Microsoft’s FTC Probe: ‘More Bark Than Bite,’ Says Analyst

Microsoft’s stock experienced a slight dip on Friday, underperforming compared to its Big Tech counterparts following the announcement of a broad antitrust investigation by the Federal Trade Commission (FTC) on Wednesday. Despite an initial decline of less than one percent, Microsoft shares were roughly flat at $424 and change by mid-morning, contrasting with gains in the broader market as the Nasdaq (^IXIC) and S&P 500 (^GSPC) climbed 0.8% and 0.7% respectively in a holiday-shortened session.

The investigation, led by outgoing FTC Chair Lina Khan, which focuses, among other things, on how the software giant bundles its cloud services with other software, like its popular office productivity tools (Word, Outlook, Excel) and security offerings, has been interpreted by some Wall Street analysts as a last-ditch effort by the current administration to challenge Big Tech before a change in leadership.

Wedbush analyst Dan Ives, in a note to clients cited by Yahoo Finance on Friday, expressed skepticism about the impact of the probe, suggesting it’s more of a “bark than bite.” He attributes this to the anticipated shift in antitrust policy under the incoming Trump administration, which is expected to be less hostile towards Big Tech.

Ives noted that with Khan’s tenure at the FTC likely coming to an end due to the recent election results, the regulatory environment for tech giants like Microsoft (MSFT) is expected to become less stringent. He predicts that the “dark days” for tech under Khan’s oversight are numbered, with the new administration potentially sidelining such antitrust concerns. This optimism stems from the expectation that Trump will appoint a new FTC leader with a softer stance on tech industry regulation.

Investor sentiment has also been buoyed by the prospect of a policy shift that could see a retreat from the aggressive antitrust actions initiated during the previous administration. Ives highlighted his belief that the era where regulators aimed to curb Big Tech’s expansive deals and scrutinize their operations is waning. He draws from historical context, mentioning his coverage of Microsoft during its past legal battles with the U.S. government in the 1990s, suggesting that any negotiations or remedies resulting from this investigation will be less severe than current fears might suggest.

The broader implication, according to Ives, is that with Trump in the White House and a change in FTC leadership, the tech sector could see a significant reduction in regulatory scrutiny, potentially removing what he describes as “a huge thorn in the side of the tech world.” This perspective was shared in light of the market’s reaction to Microsoft’s stock performance, indicating a belief among some analysts that the impact of the FTC’s investigation might be more about posturing than substantive regulatory action, especially with impending changes in U.S. political leadership.

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