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Technology Stocks : INTC
INTC 40.03-1.3%Dec 1 3:59 PM EST
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To: Harry Landsiedel who wrote (158)4/10/1997 7:06:00 AM
From: Reginald Middleton   of 990
 
<I just finished an article in Financial World which graphically showed MSFT's and INTC's price and talked about how they were, "joined at the hip."

To explain Intel's 17 PE compared to MSFT's 43, they explained that of course Intel was a cyclical semiconductor company!

Now I think a 43 PE is too high but 25 on '97 earnings would be nice. That would put INTC at around 215.>

The reason why MSFT's valuation is higher than INTC's is because MSFT has a higher economic spread than INTC. In laymen's terms, MSFT makes more money per dollar invested (after the weighted average cost of capital, taxes and expenses have been taken into consideration). If you want numerical info concering this assertion, download the MSFT and INTC summary analyses from rcmfinancial.com (fill out the form and proceed to the download links provided) and compare the economic spreads (return on investments less the WACC) and the actual economic profit ( the spread multiplied by the acutal dollars invested).
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