How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 492.01

+1.3%

Nov 28 9:30 AM EST

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To: johnd who wrote (50462)	10/3/2000 9:52:43 AM
From: Bill Fischofer	Read Replies (2) of 74651

Re: MSFT PE It's all about psychology. PE ratios only matter when considering mature businesses. For companies in hypergrowth mode they are at best irrelevant and more often an impediment to the investor seeking growth opportunity. When a company with a high PE ratio sees ratio contraction that is clear evidence of a shift in investor psychology. The reason MSFT's PE is down is because over the past year the market has adopted the belief that MSFT is now a "mature" business and its high-growth days are behind it. If this perception is correct then MSFT's decline is completely justified and the upside from here will be gradual. If this perception is proven incorrect then MSFT's upside from here will be severe as the PE expands back into "growth" range. In retrospect, MSFT was outmarketed in the court of public opinion by SUNW and ORCL. Obviously the antitrust case was a huge catalyst in this campaign and a distraction for MSFT management. But the onus is now on MSFT to reverse that perception. Until they do I do not expect to see PE expansion.

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