If MSFT matures into a company that grows EPS an average of 10% a year or so we will be at the whim of the market. Bear markets might give a company like that a PE of 20 and at the peak of bull markets a PE of 80 might be reasonable.
In a bear market, a company with 10% annual EPS growth might have a P/E of 5 or 6. Anything over 15 is rank speculation. Sure, in a bubbling bull like the one that is currently popping, any P/E is possible, depending on the speculative target du jour. But I don't think we'll see another bull market like this past one in our lifetimes.
does anyone think there's a chance that another phase of rapid growth is out there for MSFT.
If Microsoft could maintain their heady old 50% annual growth, in just 10 years their annual revenues would reach about $1 trillion. In 20 years, $76 trillion. There's only one way for that to happen, and that's runaway inflation, Deutschemark style. It's certainly not going to happen as a result of growing sales; they are simply too big.
Is there another technological revolution that they will take the lead in, or at least play a major role?
I would not bet my hard earned money on the long shot of MSFT coming up with something revolutionary. Something like a cold fusion powerplant, or a self-replicating nanomachine. Yet for them to justify their current P/E, they would have to stumble onto something that big. Voice recognition software is not it. Nor is .NET.
Most of the new platforms that MSFT is likely to develop are hardly revolutionary, and if they were, they would cannibalize their lucrative desktop software sales. And most are consumer devices, which have miniscule margins, or servers, which have free competitors.
What's possible for MSFT 5 to 10 years from now?
Best-case scenario: stagnation. Worst-case: decomposition.
Dave |
