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Strategies & Market Trends : Value Investing
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To: Jurgis Bekepuris who wrote (18203)12/18/2003 11:52:14 PM
From: Mark Marcellus  Read Replies (1) of 78476
 
Jurgis, I don't think unadjusted ROE is a good way of looking at MSFT, unless you think the current high levels of cash are essential to their business. IMO, the cash has been kept as a cushion for the worst case scenarios in the anti trust actions. As that winds down, I think you'll see MSFT start to put that cash to work, either in dividends or in acquisitions (or both). Once the cash is distributed or put to work, ROE shoots up - assuming that MSFT isn't foolish enough to invest it in low ROE businesses.

Meanwhile, as Bob point out, their enviable margins have remained pretty firm. Not to mention that the stock is currently trading at about 21 times 2002 free cash flow and 19 times 2002 operating cash flow. That certainly leaves some room to go down, but it's hardly what I would consider a bubble level.

FWIW, I do agree that most techs are well into bubble land at this point.
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