This is a post that I made on the NSCP/MSFT thread. Since there hasn't been much activity on this thread, I will post it (I am much more informal over there than i am over here)
<This is my point. NSCP may indeed be overvalued, but not overbought. I am not disputing its valuation. It appears to be oversold and a good candidate for investment at this point in time for the ST investor.>
I have differentiated between "investing" and "trading" in the past. NSCP, simply due to the nature of its volatility, holds a lot of promise for traders. As for investors, NSCP is not a wise selection. There are too many other alternaive investments with a superior risk/reward ratio that are currently creating value.
<I also don't get the part where Netscape is "destroying money". This is a pretty brash statement. NSCP has not paid dividends and acquires companies synergistic to their mission.>
It is a statement based on simple arithmetic. It is a matter of making an investment that does not cover the cost of the money that you put into it. you know like paying $60 for a stock and getting $30 back. It may very well be possible that NSCP's long term planning justifies the expenditures, but htey have not made that planning public (to me anyway) therfore the most reliable source to go onis the raw numbers. An example of communicating the planning to buy side analysts and advanced investors is to outline their startegies using DCF scenarios with optimistic, likely and pessimistic scenarios, and offer concrete schedules of amoritzation of intagibles such as marketing and R&D, allowing us who are paying attention to follow, exactly the logic and progress of thier investments. Go to the MSFT site, under investor relations, and you can actually download your own what if models and paly with them on your Excel spreadsheet.
Paying dividends has absolutely nothing to do with it. Acquiring companies with "percieved synergistic" qualtilies has a lot to do with it. Most failed acquisitions are justified by propsective (projected) synergies. The Synergies justify the premium paid for the company above market price. If the synergies don't pan out, (often they do not go as expected), then value is transferred from the acquiring company to the the sellers of the acquired company, thereby destroying value for the shareholders of the acquirirng company and creating value for the shareholders of the acquired. If the synergies do pan out, then the value over and above the premium + the cost of capital used to acquire that comapany is added to the the shareholders of the acquirring company.
A perfect example is the Novell acquisition of Wordperfect. The expected synergies did not pan out, and the Novell share price tumbled by the approximate amount of the premium above fair cash flow value (Wordperfect was a private concern) paid for Wordperfect (go ahead and check it out). This value was transferred to the private shareholders of Wordperfect. When Novell sold Wordperfect to Corel at fire sale prices, Corel's shareholders gained value, again at the expense of Novell's shareholders (the Novell shareholders have been taking a beating, MGMT needs to be replaced very quickly, they are squandering assets).
You, and the other Bill have taught me a very valuable though. I have prepared a very comprehensive valuation model that uses accounting earnings, book value, dividends etc. to value comapnies. I am giving it away because I have made it very clear, and have proven that accounting earings are very inaccurate. Despite this, most of the response has come form the inaccurate models, and the minority of my sites visitors are interested in the real way to value companies. I guess its like PT Barnum says, don't sell them what they need, sell them what they want.
Of interest is the demographics of those who truly are interested in economic eanrings.
1.) 21% analysts from companies ranging from Arthur Anderson to Bankers Trust to GE Capital.
2.) About 35% of those interested are retired corporate directors, CEO's, presidents, and entrepenuers.
3.) roughly 25% CPA's
4.) the balance are employees of high tech companies such as Novell, Informix, Microsoft, etc.
I feel there is a lot to learn in examining where certian investor's interests are?
Oh well, enough yapping for now. |
