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Technology Stocks : How high will Microsoft fly?
MSFT 510.37+1.4%3:59 PM EST
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To: 16yearcycle who wrote (9486)7/19/1998 6:52:00 PM
From: Dell-icious  Read Replies (2) of 74651
 
I suggest you listen to the conference call. Maffei clearly explains the reasons for defering revenue including the fact that some of this money comes from yearlong licensing and subscriptions.

Here are some quick eg :

1. Let's say I am an msn member and pay up for the whole year - would you not spread the revenue over the year instead of booking it immediately (in fact CD made exactly that mistake for it's travelers advantage etc clubs)

2. Let's say I am a company that plans to buy 100 copies of office a year but MS offers me a deal - a discount if I commit to it and pay up now. Then MS has scored all purchases meant for the whole year in one shot - but it was a whole years worth of sales though.

3. Finally, I sell a copy of windows but there is a 90 day period in which I need to offer free support - then the revenue may have to be split over multiple quarters

and so on.

Maffei clearly begged analysts to attribute something else - perhaps lower interest rates or fast growing economy and not deferred revenue to account for the super high P/E for MSFT.

Mind you - I am long MSFT by a large amount - but I think this stock needs a breather - it has come too far too soon. I expect it to retrace to 90 or lower in the near term.
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