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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: Valley Girl who wrote (35582)	12/16/1999 4:00:00 PM
From: Alan Buckley	Read Replies (2) \| Respond to of 74651

Agree it would be a mistake to let the hoard grow much larger, but they've made some gigantic investments this year and I expect that to continue. It takes time to find and put together such huge deals. I'm sure there are many irons in the fire we don't know about yet. I don't think buybacks would give maximum bang/buck. The entire $20B is only 4% of the market capitalization. The availability of the cash and it's effect of keeping dramatic options open to management is worth more than that IMO, especially given the extreme rate of change currently occurring in their industry. Dividends would be lame for the tax reasons you mention, but also because it would screw up their compensation model. All the employees sitting on large option holdings aren't going to work harder to drive up dividends in which they have no stake.

To: Valley Girl who wrote (35582)	12/16/1999 4:05:00 PM
From: Milan Shah	Read Replies (2) \| Respond to of 74651

The only thing I'd fault Gates for is holding such enormous amounts of cash. I think what he is doing is looking around for the right opportunities. Consider him pouring money into Winstar yesterday, or into Nextel, or into AT&T. I think he is being extremely smart about how he spends the cash. When one thinks about it, what he is doing is buying "effective control" of the bandwidth, instead of buying the bandwidth itself! For a 5% investment in AT&T, he has virtually guaranteed which company's set-top OS will be used. For a 13% investment in WinSTAR, he is virtually guaranteeing what email system will be available by default when you sign up with WinSTAR. In other words, bandwidth is a capital-intensive, low-margin, business, where you need a lot of operating experience to eke out a profit. So, rather than get into that kind of a morass, he is cleverly buying enough control so that it ensures that the high-profit software business keeps coming to him. Without paying the cost of investing in low-margin businesses, he is buying enough control to feed his high-margin business. IMHO, the guy is a bonafide genius. Milan

To: Valley Girl who wrote (35582)	12/16/1999 4:36:00 PM
From: Brian Malloy	Respond to of 74651

FWIW, MSFT is doing the right things with its cash, yes he needs more than a few billion to keep the company operating. If you lived in uncertain times wouldn't you want a larger reserve? Cash is king and hands down is the best assett for maintaining flexibility in uncertain times. In the dynamic high tech market, during what can only be considered an inflection point. The best companies should keep cash, make many investments in different areas to help determine critical paths and maintain options. When the course is known with higher probability then unpromising paths are pruned while increasing amounts of cash can be directed at the schwerpunkt(s). IMHO