Kemble,
Hi! This is my first post using @Home. I had it installed yesterday, installation was originally scheduled for Sept. 16, but Hurricane Floyd 'changed' our plans : )...all I can say is the speed spoils you! Great!
I found this in IBD, it's last weeks news but, check out the last quote it sounds like, for investors, MSFT and DELL are in the same class.
Best,
Steve
Managers Mostly Mum On Ballmer's Bomb One Notes Software Giant's Fundamentals Are Still Intact
Date: 9/27/99
Author: Peter McKenna
'I think there is such an overvaluation of technology stocks, it is absurd. I could put our own company and others in that category.'
With those words Thursday, Steve Ballmer, the president of Microsoft, either shot himself in the foot or did something wise.
Speaking to a small gathering of business reporters in Seattle, Ballmer said the price of Microsoft stock is too high and that he 'used to believe in the theory of perfect markets, but I no longer believe in that.'
Within minutes after Ballmer's remarks crossed the financial news wires, the tech sector was on its knees, led by Microsoft.
Shares of Microsoft, which had been gaining early Thursday, fell 4 7/8 to 91 3/16 on heavy trading, and the Nasdaq 100, a proxy for large-cap tech stocks, fell 4.4% for the day.
The S&P 500, comprised of 25% tech stocks, dropped 2.3%. The Dow, already having a bad day, took a pounding and ended up down 205 points. The picture didn't improve Friday.
The software giant is one of the most heavily owned issues among funds.
Data compiled by IBDshow $93 billion Fidelity Magellan with 41.5 million shares, $91 billion Vanguard 500 Index with 36.9 million shares, and $34 billion American Century Ultra with 21.1 million shares, as of their latest reporting periods. Merrill Lynch Growth led other funds in opening new positions in the leading software maker, having scooped up 1.85 million shares in its latest reporting period.
American Funds' Investment Company of America boosted its position to 7.2 million shares.
Market observers were still shaking their heads Friday, wondering why the president of the country's leading technology company would deliberately trash its stock, causing shareholders, for the moment at least, to lose money.
They also wondered why Ballmer had the clout to move the tech sector, and perhaps the entire market, so powerfully. Pundits have been complaining for years about the high valuations of tech stocks, and still they have plowed ahead. Why should it be different this time?
One reason is that Ballmer's comments came at a time when the market was vulnerable to news events. It has been struggling to move upward, spooked by the thought that the declining dollar will prompt another interest-rate hike.
And Ballmer is, after all, the man who walks one pace behind Microsoft Chairman Bill Gates at the company with the largest market capitalization in the world.
But does this mean his view is valid? Was Ballmer irresponsible because he caused his company's shareholders to lose money? Is he trying to warn that Microsoft's future growth will be limited? Are mutual-fund managers with large stakes in Microsoft and the techs running for cover?
The issue is still up in the air. Several normally responsive fund managers who have large stakes in Microsoft or the tech sector begged off the question or did not return phone calls.
'We will have no comment on the Ballmer issue and the tech sector,' said a spokesman for Alliance Capital Management, which runs Alliance Premier Growth Fund, a fund that recent data show has owned more than 2.4 million shares of Microsoft.
Microsoft issued a press release saying Ballmer's comments 'were not intended to signal a shift in any financial guidance about the company. In fact, later in the day, he (Ballmer) realized he had been misunderstood and clarified that he hasn't sold any of his shares and was not advising anyone else about their individual investment strategies.'
The rest of the release, however, talks about the high valuations of tech stocks, saying 'they are high relative to any historical valuation.'
This was cold comfort for Microsoft shareholders and tech investors. One manager who was willing to voice an opinion on the matter was Fritz Reynolds, manager of $394 million Reynolds Blue Chip Fund.
'Microsoft is notorious for keeping investor expectations low,' said Reynolds. 'Ballmer's comments were a little stronger than usual, and that was a surprise. But it's nothing unusual.'
Reynolds does not believe Ballmer acted irresponsibly. 'It's actually a smart thing to keep expectations low,' he said, 'because it keeps a stock from getting ahead of itself, which can lead to drastic sell-offs. Perhaps it was time for Microsoft to back off a bit and create a buying opportunity.'
Reynolds said Ballmer's cautionary tone will have no impact on his 4% stake in Microsoft.
'The company's future earnings potential,' he said, 'is unlimited, because the Internet's future is unlimited. Microsoft will grow as the Internet grows, as evidenced by its recent alliance with Ford to sell cars. It's a miraculous company.' |
