SEEK~MSFT=tracking stocks................More on why I love SEEK at these levels.....The solution: a tracking stock, which would pay or not pay dividends
based on the performance of the Internet business. Investors, the logic
goes, would quickly bid it through the ceiling, although for all intents and
purposes it would still be part of the mother company. Analyst Powers
estimated that Microsoft's Internet operations would have a stand-alone
market value of about $50 billion.
Microsoft Hits Record On
Expected Internet Equity
By Reuters, 07-16-99 19:08
SEATTLE (Reuters) - Microsoft Corp. stock surged 5 percent
Friday to a record high on expectations the software giant will
establish a separate tracking stock for its Web properties to
cash in the Internet investment craze.
Microsoft declined to comment on a report the company might
announce the new tracking stock at its annual meeting with
financial analysts in Seattle next Thursday.
A company spokeswoman said only that a tracking stock is
an idea Chief Financial Officer Greg Maffei and others have
considered ''several times over the past couple of years.''
But analysts said they thought the new issue was likely as
the company seeks to unlock the value of its massive
investment in online properties and attract and retain new
talent in the face of competition from high-flying Internet
startups.
''It would give Microsoft some additional currency to go acquire
new Internet properties,'' said Bill Epifanio of J.P. Morgan. ''It
would also give them options on those tracking shares that
would help them attract good talent.''
Microsoft ended up $5.06 at $99.44, pushing the company's
market capitalization past an unprecedented $500 billion and
propelling Chairman Bill Gates' stake to nearly $100 billion.
In addition to the tracking stock report, first published in The
Wall Street Journal, Microsoft got a boost from a federal jury's
decision to award Bristol Technology Inc. just $1 in the first
antitrust trial against the company to reach a verdict.
Analysts also said they expected Microsoft to beat the
consensus estimate by one to two cents a share when the
company reports its fourth-quarter earnings Monday. Microsoft
is expected to report earnings of 36 cents a share, compared
with 25 cents a year earlier, according to First Call.
Microsoft executives long have complained the company's
stock price does not reflect the full value of its Internet
investments compared with ''pure play'' rivals like Yahoo! Inc.
While Microsoft's stock continues to provide a handsome
return for investors, the company has seen a growing trickle of
defections by middle managers lured by the potential riches of
Internet startups.
The lack of an Internet-type stock currency also has been
cited as one of the reasons the world's biggest software
company has been unable to recruit a high-profile executive
from outside the company to lead its online business since
group Vice President Pete Higgins departed last year for an
extended leave of absence.
''As they look out across the organization they realize they
need some new blood at executive levels, but the executives
they want really want to be running their own shops,'' said
analyst Rob Enderle of Giga Information Group.
A tracking stock theoretically would trade at some multiple of
the estimated $800 million in annual revenues from
businesses including MSN Internet access and related
content properties grouped under the msn.com portal site.
But the move would stop short of spinning off the properties
into a separate company as advocated by some.
''My thought all along has been that what they should do is
spin the thing off,'' said Scott McAdams, president of
McAdams Wright Ragen, a Seattle brokerage.
''They're probably still of the mind that they can compete
effectively as a very large organization and they're better off
having all these things under one umbrella,'' he said. ''It's been
the legacy of the company.''
Enderle questioned whether Microsoft was nimble enough to
compete effectively in the rapidly consolidating Internet space,
comparing the 24-year-old Redmond, Wash.-based company
with lumbering giants like Hewlett-Packard Co. and
International Business Machines Corp.
''They are not being thought leaders right now,'' he said. |
