Wednesday April 5, 8:27 am Eastern Time
Forbes.com
Microsoft Stock Looks Like A Bargain
By Amy Doan
Investors shouldn't shy away from Microsoft this week, say analysts
watching the stock.
In fact, since most do not expect yesterday's ruling that the software giant violated antitrust laws
will result in damaging structural changes. They say the company's stock looks like a good deal
even in the low $90s. It closed today at $88.94, down $1.94.
Investment houses Credit Suisse First Boston and PaineWebber reiterated the Redmond, Wash.,
company at strong buy and buy ratings, respectively. Other analysts contacted by Forbes.com
view Microsoft as one of the more attractive stocks to fall in this week's Nasdaq plunge.
Microsoft (Nasdaq: MSFT - news) shares yesterday dove $15.38, or 14.5%, to $90.88.
Two aspects of yesterday's ruling by U.S. District Court Judge Thomas Penfield Jackson help the
company's appeal prospects. First, there was no finding that Microsoft's ``original equipment
manufacturer' arrangements--or marketing arrangements with hardware partners--were abusive.
Second, there was no harsh language included about Microsoft's impact on browser competitor
Netscape Navigator's market share.
As a result of it current legal migraines, Microsoft will probably have to make ``behavioral'
changes in its sales and marketing practices. But more severe ``structural changes' that would
break up the company are less likely, say most observers.
Microsoft has traded in the high $90s and $100s since last November. But emotions over
yesterday's ruling and a broad technology selloff slammed the stock. Still, experts anticipate an
upswing in the company's fortunes on Wall Street.
``It's looking quite good to me,' says analyst Paul Dravis of Bank of America Securities in New
York, who expects Microsoft to hit $140 within 12 months. ``The ruling doesn't change a
competitive landscape where Microsoft dominates servers and desktops.'
The alternative operating system Linux will fight Microsoft for the Internet appliance market
over the long term, but Dravis still sees Microsoft as an attractive story. ``I don't see anything
unseating them in their current market,' he says. ``And that market will be attractive enough to
bump the stock up this year.'
Others said the stock shouldn't be lumped in with other technology issues falling to earth this
week.
``Microsoft at 51 times earnings [based on a late-trading price of $87] is an excellent purchase,
compared with inflated stocks like JDS Uniphase (Nasdaq: JDSU - news) and Ariba (Nasdaq:
ARBA - news), which have yet to hit bottom,' says Mark Corcoran, retail analyst for D.A.
Davidson in Portland, Ore.
Corcoran's long-term price target for Microsoft is $150, based on the growing acceptance of its
Windows CE operating system and a stronger-than-expected launch of Windows 2000.
Regards
Neil |
