Does this sound familiar... backtesting of my first reaction on MSFT.. was my read on the dot..
<<Michael Kwatinetz, an analyst with Credit Suisse First Boston wrote in a note to clients that Microsoft stock had much of the negative impact of a court decision already factored in to its stock price, and he advocated buying the stock.
``At some time (Monday), the risk associated with the case is likely to be maximally reflected in the stock. Subsequently, the stock could trade with fundamentals,' he said.>>
Message #29600 from IQBAL LATIF at Nov 7 1999 6:25AM
I have few observations on Microsoft. I would think 87ish is a support if it breaks that on two closing basis we go to 83 and 80, the ultimate low would be 70 if uncertainty continues, my outlook extends into next quarter and not immediate like IBM it will break supports slow and steady.
Like always as the tradition of this thread has been, I don't forecast the death of markets.
I am not a prisoner of my beliefs, I look amidst ultimate possible disasters the ray of 'reason and balance' without my emotions, without my feelings. I have never ever highlighted and talked in terms of thousands of points rather I talk SPZ and hence talk in terms of 10 points up or 15 down..................
............This weekend new mantras are being devised, naturally why not after all MSFT is about to be written off by these very guys who wrote the markets off since last four years. A maniac is an unbalanced spoiler, he never learns, and when he gets some corroborated evidence that by any chance helps his cause he makes bloody sure to spoil the party of those who are enjoying over weekend being a part of this great bull market. A judgement on Friday night on the largest company in US, naturally is not something to be missed. The natural inkling is to forget objectivity and stitch new damning forecasts. The spin masters work overtime and have now predicted that the fall from grace is imminent, if inflation fears could not do it for them MSFT fall from grace as it is the leading weightage in Comp will ignite that panic selling leading to total chaos and confusion.
Like we play these extreme downturns in case of SPZ only with a level headed approach. MSFT has to be handled with care with a stepped down approach. Since, extremist attitudes are possible within a market we need to see that direction is shown to us by SPZ and NDX, I see some opportunity in short term for MSFT on the weak side and that is how I am going to play it.
Market hates uncertainty and MSFT case provides it nice and big so the stock will be under pressure, the shorts will take a shot but will it work on over all market. On that jury will be out! I think it will depend on impact of breakage on the overall economy. So far that impact is not very clear undoubtedly MSFT has a great weighting in Comp however, breaking of monopolies in the past have not diminished the valuations of companies. The sum total of AT&T parts today is far bigger than the what the mother unbroken company would be today look at LU if I am right it was a spin off from not even the original AT&T but rather a spin off from a part of it... MSFT guys are working on it they already have compartmentalized the company in to four divisions and are preparing for the worst probably so MSFT in parts will be worth how much is the key question. If it is higher the market will not suffer but if it is lower we may see some serious adjustments.
My inkling is that parts of MSFT will be bigger than original company and will turn out to be more productive, a settlement may lead to spinning out of some units. We need to be careful not to be inundated with thoughts of negativity the uncertainty surrounding MSFT and MO are two different animals, one faces a future like ICI and Zeneca ( the two daughter companies capital after spin off was twice of the one before within a year) other is hit by so far unquantifiable damages.
MSFT business may be broken but its ability to make money will exist, I would rather buy some long puts than short this stock as I know that after initial jitters as people dump it values would be created. I will try to get out of positions at the at most opportune time and that would be between 70 to eighty.
Now, I am looking at this stock performance, really since it first touched 88 in Feb 99 the stock has not done much, this 'monopoly' problem has been weighing on it, finance.yahoo.com now look at SUNW finance.yahoo.com that stock has doubled from that Feb 99 date, for me the dancing bears on the tails will soon see some disappointment as they would discover that a smaller MSFT neither would make Gates poor nor will make MSFT operating system sent packing to dustbin of history. The premium attached to MSFT is not the monopoly premium rather it is the ability of the company to ?create wealth?. One can ask why GE is trading at such a dear multiple? I have repeatedly argued that this is ?winner takes it all phenomenon? and those who have a lock on markets have a better prospect going forward. Whatever one may say even the fiercest critics of MSFT would agree that revenue growth and bottom line growth is not going to suffer in foreseeable future. UNIX or Java are not going to become the operating system replacing Windows, it may be that other fledgling companies like Novel Orcl SAP may rather thrive, so market may not be impacted that much overall. MSFT loss may be other minors gain, the secondary companies may thrive well as competition opens up. .
P.S. added on 8/09/99
The above is good example of how we treat the news here, how we analyse them and how we deduct results from panic. Holding hands and giving that support so as not to ignite panic is the objective that is the reason we do so well..
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