How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 444.15

-2.3%

3:59 PM EST

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To: Sonki who wrote (859)	4/6/1997 9:31:00 AM
From: Joan Osland Graffius	of 74651

Sonki, >>I DON"T understand what does having lots of cash have anything to do with hidden earning? When each copy of Windows 95 or any other microsoft software product is sold the company only reports a portion of that sale as revenue and earnings. The earning associated with that portion is reported as a liability.:-) Love it!!! What the company is doing is saying I will have to use this cash to support the product like hotline support, etc. I don't really know what get's charged against this liability account. Now if you look at the history of microsoft's balance sheet this cash just keeps growing and growing and growing. This cash is earning at minimum short term interest rates. If the boy's don't watch out they will have a self supporting trust.:-) BTW, this is all legal, invented by microsoft and used by other successful software companies. I use this as part of my evaluation of software companies when I buy them. If they are rich enough to accumulate this type of cash they are a good buy. Two companies I own that have hoarded this type of cash are Adobe and Oracle. With all that, what you have to do is add this liability each quarter to their earnings to get an equivalent PE of another company. The problem is you don't know what is subtracted and added to this liabiality account each quarter, i.e. what did they spend and what did they add. Also if you look at microsofts marketing costs you can predict their earnings for the next quarter. I don't know if the guys engineer this or not, because of my previous discussion of their unreported earnings. BTW, if you have access to Merrill Lynch Online they have analysis of microsoft and a buy short term and long term. It is my opinion this stock will, at least in the not to distant future, see this low price for the stock. I think $95 is a steal. I have been wrong before. Joan

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