Despicable.....Microsoft: Tech Stocks 'Overvalued'
By MARTHA MENDOZA AP Business Writer
SEATTLE (AP) - The president of Microsoft Corp. (Nasdaq:MSFT - news) warned
Thursday that technology stocks are overvalued, including those of his own company, in public remarks
that helped accelerate a sharp selloff on Wall Street.
The Nasdaq composite index, which is dominated by technology bellwethers such as Microsoft and Dell Computer fell 108.33
to 2,749.83, its fourth-biggest decline ever. Microsoft shares fell $4.871/2 to $91.183/4 while Dell fell $3.061/4 to $43.
Microsoft president Steven Ballmer was speaking during a question and answer session at a conference of the Society of
American Business Editors and Writers.
When asked what story business writers are not covering these days, Ballmer said he doesn't think there's much emphasis on
writing about the overvaluation of tech stocks in general.
''There is such an overvaluation of tech stocks that it's absurd,'' he said. ''I would put our company and I would put most
companies in that category,''
Ballmer blamed a ''gold rush'' mentality for the stock rises, saying that the profits being earned by the tech companies don't
justify the high prices.
''It's bad for the long-term health of the economy,'' he said. Ballmer explained that since many technology companies pay their
employees with stock options, the industry is essentially delegating employee compensation to Wall Street.
Any major market decline could render those options worthless, substantially cutting the income of tech sector workers.
Despite Ballmer's strong remarks, his company moved on Thursday to exploit the market's high prices. It announced plans for
an initial public offering for its Expedia travel reservations site, a move that will give investors the opportunity to focus on just
one aspect of the company's business and bring in as much as $75 million.
The Expedia stock offering is the latest in a series of maneuvers Microsoft has made recently to help its more promising online
ventures flourish.
Ballmer's comments echoed those of Internet analyst Lise Buyer of Credit Suisse First Boston, who told the writers that tech
companies' stock prices are generally overvalued.
Ballmer and other Microsoft officials regularly play down the company's profit expectations amid criticism that the world's most
powerful technology company wields too much dominance in the software industry.
But as the No. 2 Microsoft executive behind chairman Bill Gates, Ballmer's public statements are closely watched by Wall
Street for signs of where the technology business is headed.
Still, a Microsoft spokeswoman downplayed Ballmer's remarks.
''There's nothing new here,'' said the spokeswoman, Caroline Boren. ''Microsoft has always been cautious in its outlook.''
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