Microsoft ruling sparks share frenzy

US stocks have endured a turbulent day's trading following a court case ruling against the world's biggest software company, Microsoft.

In what appeared to be the most volatile day in the US stock market's history, both the Dow Jones and the Nasdaq each plunged more than 500 points, before rebounding.

The Nasdaq reached a low of 3,649 points, a 13% drop on the day, before recovering to close down 74 points at 4,148.

The Dow Jones Industrial Average recovered from its lows to close down 46 points at 11,178.

Initially some analysts said that Microsoft's problems were just an excuse for investors to buy 'old economy' stocks instead.

On Monday, the Nasdaq fell 8% while the blue-chip Dow Jones remained strong.

But tumbling technology stocks dragged blue chip stocks lower on Tuesday.

Trading was volatile. From its high to its low on Tuesday, the Nasdaq swung 634 points, its biggest one-day point swing ever, while the Dow swung nearly 700 points.

Pressure builds

Technology stocks have been under pressure for some weeks. Many newer companies have yet to make a profit but investor enthusiasm for the internet economy has propelled their shares to new heights.

Judge's options

Break-up - Split into three - operating systems, applications and internet content

Open source code - Competitors could add or modify Windows to use their own software

Fair pricing - Bar on discounts to firms which exclusively use its software

Baby Bills - Create several identical versions of Microsoft

The drop in share prices has been welcomed by some analysts, who say that they are now valued more realistically.

Microsoft closed about $2 lower at $88, having dropped $15 on Monday.

Elsewhere around the world, technology stocks fell, with UK, German and Asian stock markets dragged lower by the sell-off in technology stocks.

Microsoft ruling

In a landmark ruling, District Court Judge Thomas Penfield Jackson found on Monday that Microsoft had broken US anti-trust law by attempting to monopolise the internet browser market.

The judge has not yet decided what action to take against Microsoft, but penalties could include a break-up of the company.

Judge Jackson plans a new round of hearings to decide on "remedies".

Microsoft's Windows operating system runs more than 80% of the world's personal computers.

Vow to appeal

Announcing his determination to appeal, Microsoft founder Bill Gates said: "Microsoft's past success has been built on innovation and creativity, and our future success depends on our ability to keep innovating in the fastest-moving marketplace on earth."

Legal analysts say the case could go all the way to the US Supreme Court, delaying significant changes in the market for several years.

US Attorney General Janet Reno said the consumer would ultimately benefit from the decision.

Justice Department anti-trust chief Joel Klein said the decision showed that "no company, no matter how powerful or how successful, can refuse to play by the rules".