How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 476.93

+0.6%

Nov 25 3:59 PM EST

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To: Reginald Middleton who wrote (10183)	8/19/1998 1:52:00 PM
From: Gerald Walls	Read Replies (1) of 74651

I have stated before that accouting earnings should be ignored in valuing companies. I have personally run analyses of earnings against market value for high growth companies, and earnings tend to mean diddly. I have made it easy (and free for the stingy) to run thier own analysis as well. The Fools had a piece today that at least partly supports your argument in Dell's case, although Dell's earnings don't leave much to be desired. fnews.yahoo.com "GAAP accounting for earnings does not capture the $1.5 billion in cash that Dell has generated from its negative working capital float over the past 11 quarters." Once again, free cash flow (earnings before depreciation minus capital investment and working capital investment) ran in excess of reported earnings at Dell -- the 11th quarter in a row for that to take place, Befumo explained. At its highest point, free cash flow was running at 323% of reported earnings. All of this takes place by design at Dell, it's not just an accident.

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