Harvey: A good post to an excellent "value added" article.
What I find sort of interesting is that (a) the judge agreed to do the interview in the first place, and (b) his open admission of the extent to which his expertise is limited and that he had to rely on DOJ experts and rubberstamp the DOJ proposal as a result.
Some commentary on the investment ramifications of today's decision:
Microsoft investors face split decision
news.cnet.com
"We would expect all key management to go with the applications company, given that the operating systems business as configured by the DOJ would effectively be neutered, stripped of nearly all exciting opportunities to expand the market," Rick Sherlund, a closely followed analyst with Goldman Sachs, wrote in a recent research paper.
and this:
Melissa Eisenstat, a CIBC World Markets analyst and one of two Wall Street soothsayers with a "hold" recommendation on the current company, favors Microsoft's Internet and applications operations that would be run by the new company. Based on projected price and earnings ratios, as well as cash and equity investments, she estimates that the Internet business would grow 100 percent annually over the next several years and that the applications operation would rise 15 percent.
By contrast, the total growth of the operating systems company would grow an estimated 20 percent.
"We are liberal in our Internet and consumer growth rates because the market has been placing a liberal premium on Internet plays," Eisenstat wrote in a report released in April.
The applications and Internet company would have a stock price of $40.16 for calendar 2000, with an estimated earnings per share of $1.05, according to her research. The operating systems company, meanwhile, would have a stock price of $17.70, with an estimated 73 cents earnings per share.
That comes to a total value of $57.86, vs. today's price of ~$70, unless of course internet valuations crash, in which case the value would be lower.
It's also worth noting that the exercise price of the options they just issued is ~$66, which means they'd be worthless, at least in the short run, if the breakup survived the appeals.
Not a pretty picture if you believe the analysts, especially if you bought into the hype on this stock at $119 a few months ago.
But, you might ask, where are all the analysts who thought the company would be worth more after a breakup? Why aren't we hearing whoops of joy from them? A good question. |
