I like this single thread on MSFT.
Re: Earnings machine. In addittion to WINDOWS-NT and WINDOWS95/OFFICE97 for NetPCs there's also this huge WINDOWS market in India and S Africa. The next quarter will belong to Windows-NT. I see India exploding starting next year Q3-Q4, when Net PCs start to become stable in the US.
So, just when Windows95/Office97 slow down in the US, they will start to climb in India and S Africa. Bill Gates has better use for his time, than tour. IBM used this strategy for a long time. While newer generations were introduced in the US, older generations fetched a premium in India.
Microsoft has routinely cautioned about earnings, however they have been more emphatic about Calendar Q3, because they will be taking a charge for WEBTV and it is typically a slow quarter, a double whammy. If it is a slow quarter, why would they time the purchase so? Perhaps to drive the stock to realistic levels, hopefully the analysts have got the message this time. By doing so they hope to stabilize it, and also to help in their buy back. MSFT has not repurchased any yet, because they believe it was at an unrealistically high level.
What does this all mean ?
MSFT will probably become the IBMs and the AT&Ts of the past generation. Widow's and Grandmother's favorite holdings. You don't want to scare them by dropping 6% in one day.
This was probably the last you will see of such phenomenal growth, and rapid decline.
MSFT will drop another 5-10 points before next quarter's earnings, then stabilize at around 160-170 and grow at a steady pace of 20-25%. |
