How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 483.03

+0.5%

Dec 5 9:30 AM EST

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To: Bearded One who wrote (33164)	11/21/1999 7:52:00 AM
From: Bilow	Read Replies (3) of 74651

Hi Bearded One; With that post on the valuation of MSFT's cash, you have placed your finger precisely on the crux of the current stock market bubble. MSFT makes money. They can borrow money at will. If they suddenly lost or gained a billion dollars, their market cap should fall or rise by that same amount. But since they are MSFT, most investors currently apply a multiple greater than one to that pile of undistinguished money. On the other hand, they wouldn't apply that multiple to a pile of debt. I really believe that if MSFT borrowed $10 billion, and increased their money pile with it, the herd would bid the share price up, even though the company would pay out more interest than it would earn on the borrowing. If the company turned a billion dollars into plant and equipment, chairs, desks, and computer equipment, then investors could be right to value it at more than a billion dollars, but only if it were being used to make money. -- Carl

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