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

To: johnd who wrote (42546)	4/19/2000 11:23:00 AM
From: johnd	Read Replies (1) \| Respond to of 74651

What if MSFT reported stronger than expected Q?, Wall street took the stock down from 90 to 80 in expectation of a weak Q, but what if MSFT surprised street with the 1.5Million Windows2000 sales, pick up of PC and corporate sales in after mid Feb into end of March? I think the chance of a pop 10 point pop up is very high.

To: johnd who wrote (42546)	4/19/2000 12:03:00 PM
From: UnBelievable	Read Replies (1) \| Respond to of 74651

MSFT ia still trading at about twice the PE of IBM. (50 vs 25) MSFT has significantly more shares in the form of employee stock options that have traded on the open market. They have recently indicated that they are going to be giving out many more options, both to existing people and as part of their ongoing need to attract new people. The fact that so much of their compensation expense is in the form of options, which do not show up on their income statement, results in their reported earning being much higher than they would be if the cost of options were reflected. This ongoing flow of additional shares into the market will require MSFT to grow both the top and bottom line faster than has been the case in the past year, as currently expected in the current year, and much faster than IBM just to keep EPS level. Anyone who doubts the numbers of shares new shares coming onto the market should check the Form 144 filings in EDGAR. In addition both the law of large numbers, the necessity of not being overly aggressive in the market, the difficulty they are already having attracting and retaining the really best people, the significant competition they are facing as they continue to scale up not only their products but their infrastructure to compete at the enterprise level, all will make the next five years extremely difficult. All this not to say that Microsoft does not have the ability to face these challenges. The problem is that the today's Microsoft is not the Microsoft of tomorrow. Neither is is clear that they will emerge as the IBM of today. As a case study in how to grow from nothing to greatness I think Microsoft is without competition. As an investment opportunity now it simply not a good value. There is a significant downside risk in Microsoft as compared to IBM and not significantly more upside potential. Over the next year you are going to see Microsoft's stock continue to fall until it is trading at a PE more in line with IBM's. Until that time If I had money that I wanted to invest in sure thing tech company I would take IBM at half the cost of Microsoft in a heart beat. These are my opinions and are not investment advice.