How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 496.92

0.0%

Nov 7 9:30 AM EST

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To: X-Ray Man who wrote (5395)	3/7/1998 12:15:00 PM
From: Shibumi	Read Replies (1) of 74651

>>Just some contrarian thoughts.<< Deeply appreciate the thoughts. Of course, the fact that Intel would eventually go from 60% to 50% gross margins on the Pentiums, and have to do a different architecture for the set-top (which is why I thought they licensed the ARM -- and of course are acquiring StrongARM in the Digital Deal), is something that's been known or at least openly theorized for quite a while. But your point here is absolutely valid -- I've owned a lot of Intel for years, and continue to hold it, but the biggest risk to that company is that they fill their fabs with lower cost/lower margin parts. I am a bit confused, however, as to exactly how the pressure would be exerted on Microsoft to lower the prices to OEM's. Of course, any OEM can ask -- but "pressure" to me implies that the OEM could do something more than plead -- and I don't understand the leverage that the OEM's have on Microsoft. The major issue I see for Microsoft in the last week's round of announcements is the theory that supply and demand on PC's isn't as price-elastic as previously might have been believed. This would certainly have an impact on the very high P/E ratio Microsoft currently commands. Then again, the resellers have stated that they are not seeing a slackening of demand (reference: WSJ last week: Ingram, etc.), but of course the details are not yet known.

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