How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 474.82

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3:59 PM EST

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To: Deliveryman who wrote (22280)	5/6/1999 3:35:00 PM
From: Bill Fischofer	Read Replies (1) of 74651

Another masterful negotiation by MSFT According to news.com Microsoft said it will pay $5 billion for newly issued AT&T preferred securities and warrants. The preferred securities priced at $50 each will make a quarterly payment of 62.5 cents per security. The warrants will be exercisable in three years to buy 40 million AT&T common shares priced at $75 per share, the companies said. So let's do some math. MSFT takes $5 billion in idle cash which is probably earning less than 5% and gives it to T. In exchange they get: 1. Preferred stock and warrants which over the next three years pay a 5% dividend. 2. After three years give MSFT the right to buy 40,000,000 T shares at $75. These will be "in the money" if T shares can appreciate at 8% over that period. 3. Gets T's commitment to effectively double their Windows CE deployment in settop boxes. Correct me if I'm wrong, but as I read this T is paying MSFT a higher interest rate than their cash would otherwise earn and is giving them a pile of T options which look like a pretty good bet in exchange for the privilege of buying more copies of Windows CE from MSFT. What a deal!

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