Paul
You make a reasonable point, but miss the boat.
A low P/E for Intel? Did it ever occur to you that P/E's are lower in capital intensive industries for a reason.
Check
wsrn.com
and
wsrn.com
If we go by "your" argument, then "Return on Assets" is what you are talking about.
ROA for Intel is 25.4% and is 24% for MSFT
YEAR 1997 1996 1995 1994
MSFT 24.0% 21.7 20.2 21.4
INTC 25.5% 21.7 20.4 16.6
In "reality" all it takes to compete with MSFT is a garage with a few PCs and you are in the software business. To be "competitive" you need a CDROM writer too and a supply of blank CDs. Maybe $10K will get you going. The fact it is so easy to compete with MSFT and so few do effectively is why the Feds are going after MSFT (they are expert at eliminating or swallowing their competition).
To compete with Intel, you need $1B-$2B in capital for a good fab, expert process engineers for every process (otherwise you have AMD), and a good working relationship with HWP for the next uP design, with AMAT for the latest fab equipment, on and on.
I might have made an argument that Msft is overvalued, but then you probably need to look at EVA of which I do not have a good link for. Msft does use conservative accounting and, most importantly, the $89 price for a new version of Windows, $250 for a suite and $250 for WindowsNT is not expected to drop in half every 18 months or so.
For me, it is easy to see what Intel does with its $15B in assets, but what does MSFT do with its $11B in assets?
reposted at suite101.com
regards
Kirk out |
