By breaking up Microsoft, you will be unlocking significant value. Imagine the value of MSN.com, Expedia.com, carpoint.com and encarta.com as separately run businesses - especially over the short to moderate term. Now think of them as a combined internet force, whose reach is second only to yahoo, but whose technology is superior and proprietary. Thier ecommerce to advertising revenue mix is much richer than Yahoo's, and they should have no problem at all attracting top talent if separated from MSFT - comp P/E ~800.
Now think of Office, with 90% plus market share as a standalone company, which controls its industry with the defacto standard, moving into the ASP business and becoming a B to B .com company. Comp PE ~166
Now think of the only consumer OS that is compatible with over 90% of the PC hardware available. It has 88% plus market share, and is completely impervious to reverse engineering from practical perspective. It also has a corporate OS that is the second fastest growing product in the category and is setting records on a regular basis. This company also has the most feature complete web server technology available, bundled in for free. They also have a thin server version and are about to launch pace setting 64 bit technology in order to sell to a heretofore unprecedented (and unavailable) customer base which would bring even higher margins and consulting revenue. Comp P/E ~55
Add in some of the most popular tools and programmings languages, and you get a company that will explode in aggregate valuation. A blended mean PE yields something around the order of 340. Substantially higher than MSFT's current 56. I have a lot of room to be off here and MSFT will still climb in valuation. Comps are the way you value MSFT in a breakup, and comps reveal MSFT to be jewel in the making if it was broken.
Remember, MSFT leads in practically every category. If they are broken up, it frees them to become VERY aggressive competitors.
I will perform another analysis of MSFT, including breakup value for my finance site next week. It will have all of the supporting data. |
