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

To: Yaacov who wrote (43687)	4/27/2000 7:30:00 PM
From: johnd	Read Replies (1) \| Respond to of 74651

Yaacov, It could be that INTC & AMD doing OK with flat unit volumes but higher ASPs selling high MHz and have capacity problem for lower MHz - this could hurt MSFT. Note that for Microsoft whether it is 1GHz or 500MHz, s/w prices are the same. Secondly, for a long time MSFT has been eating into its deferred revenue and that part was dwindling. So I think unless that part gets back to growth we may see lower rev. growth on top line as these things take time to catch up. Only upside I see to MSFT is around Sept to Dec. when the effect of W2K should be felt. But I don't feel confident about up move until Q4 results come out and they guide analysts to look for better days. Not like last Q. I almost puked after the Q3 conf. call.

To: Yaacov who wrote (43687)	4/27/2000 7:35:00 PM
From: KLP	Respond to of 74651

Another article tonight....with very diverse opinions..... Microsoft Break-Up Plan Sparks Shareholder Debate By Scott Hillis Apr 27 6:22pm ET SEATTLE (Reuters) - Are two Microsoft's (MSFT.O) better than one? That's the debate raging among analysts, observers and, most of all, Microsoft Corp. (MSFT.O) shareholders as they await details of a U.S. Justice Department plan to split the software giant up as penance for its antitrust sins. Justice and the 19 states that are suing Microsoft have until Friday to file a proposed penalty and no one yet knows exactly what their blueprint for break-up will look like. But sources in Washington have said the Justice Department will propose cleaving Microsoft in two, with one company taking control of the Windows operating system and the other taking charge of applications such as the Office suite of business software. Microsoft, which has vowed to appeal the case all the way to the U.S. Supreme Court if needed, insists a break-up would be extreme and unjustified, torpedoing its business and taking investors down as well. Indeed, just the speculation the government will seek such a harsh remedy has helped drive Microsoft stock down 43 percent from a 52-week high of nearly $120 a share. The stock rose 1-13/16 to 69-13/16 on Thursday. ARE BABY BILLS THE SAME AS BABY BELLS? The numbers indicate that even smaller Microsofts will be plenty big. In its third quarter, Microsoft raked in more than $5.6 billion in revenues. Windows sales accounted for about 41 percent of that, with applications, including Office, making up 46 percent. ``I think the stocks would do well, because the current revenue-generating products are pretty strong,'' said Scott McAdams, president of Seattle-based brokerage McAdams Wright Ragen. ``Office is enormous and Windows in enormous and their respective market shares are enormous. The Street would pay you some pretty good multiples for that kind of market share,'' McAdams said. Some analysts point to the carving up of telecommunications giant AT&T Corp. (T.N) in 1984 into a handful of ``Baby Bells'' as evidence that Microsoft shareholders stand to reap windfall gains if they end up holding two or more ``Baby Bills''. ``If I was a shareholder I'd be rooting for a breakup,'' said Gary Beach, group publisher of CIO Magazine. ``Financially, it could be not a bad scenario for holders of Microsoft shares,'' Beach said, adding he did not think a break- up was warranted and that restrictions on Microsoft's behavior might be a better remedy. WOULD BREAK UP BOOST GROWTH POTENTIAL? Splintering off applications from the operating system would allow both units to tap new markets neither dared to explore before, such as writing software for the upstart Linux platform. ``Long-term, I think it would open them up to growth they currently cannot experience,'' said Rob Enderle, an analyst with Giga Information Group, a technology research firm. ``The platform unit and the applications unit are sort of capped by each other. The applications can't move to other platforms for fear of cannibalizing Windows and neither one of them view the emerging markets as being of potential.'' But short-term investors beware: if the judge does rule for a break-up, the stock would almost surely be battered for months as Microsoft and regulators hammered out details on who gets what, analysts said. ``It probably would be negative for value while the companies figure out what they're supposed to do,'' Enderle said, adding it could take as long as a year-and-a-half for investor confidence to return. BREAK UP MIGHT NOT HELP CONSUMERS Opponents of a break-up say it could wipe out vital links between the platform and application businesses, hurting the new companies and their share prices. Richard McKenzie, a business professor at the University of California in Irvine, says comparisons to AT&T hold no water because the Microsoft case is fundamentally different. ``AT&T was a regulated monopoly before the breakup, meaning there were legal barriers to entry,'' said McKenzie, who has recently published his book, ``Trust on Trial: How the Microsoft Case is Reframing the Rules of Competition.'' ``It's illogical to argue that Microsoft is now a monopoly, presumably charging monopoly prices, and that a break-up will lead to more competitive markets and a higher market value for all Baby Bills.'' Analysts also debate whether consumers will benefit. Some, like McKenzie, say prices will rise because Microsoft has sold Windows cheaply in part to boost sales of Office. Others counter that challenges from new technologies will force prices down anyway. In the end, the smashing of Microsoft may be tantamount to a roll of the dice. ``It's a bit ludicrous of anybody to predict the effect of such a break-up on the industry and say with any certainty whether it would be positive or negative,'' said Dwight Davis, an analyst with research firm Summit Strategies. ``It's at best a risky move on the part of the Department of Justice to propose a structural remedy when they know no better than I would the ramifications of that.'' ``It's really a snake pit of figuring out the possibilities,'' he added.