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To: Seeker of Truth who wrote (33376)	10/19/2000 2:03:24 PM
From: EnricoPalazzo	Read Replies (1) \| Respond to of 54805

Investment in startups is a big business for Microsoft. I think profits in that sector should have the same place as "operating" profits Yes and No. Three good reasons to like profits from start-up investments: -investing cash flow is still cash flow -investing in start-ups is a sustainable part of our business model (and Intel's) -we have a core competency in making such investments, by virtue of our competitive position. OK, the last two are sort of the same... Anyway, there are some drawbacks: -It's very easy to manipulate these numbers to smooth out quarterly results. -Profiting from shrewd investments is a sustainable part of our business model only because of our strong competitive position. This would imply that the really important issue is our ability to sustain this competitive position going forward, not our ability to milk it in the short term. Seen in this light, weak "operating" cash flow (as usually defined) is far more important than strong investing cash flow. This last drawback is pretty important, IMO. Just my opinion, not Microsoft's... ardethan

To: Seeker of Truth who wrote (33376)	10/19/2000 10:27:51 PM
From: saukriver	Respond to of 54805

Investment in startups is a big business for Microsoft. I think profits in that sector should have the same place as "operating" profits Microsoft can generate more software for next to no marginal cost. Good investments are harder to come by. The menu of potential decent startup investments is limited in this market. Further, Microsoft has made some really dumb investments like Web-TV and all the dough it has plowed into MSN-related stuff, $5B to AT&T, etc. Thankfully, MSFT could liquidate enough of its investments to generate good numbers for Q3. But with software (desktop OS and applications) I am confident that there is an infinite supply of electrons MSFT can sell. With investments, the continued stream of investment income is a riskier proposition. The investment/mutual fund part of its business certainly is not the gorilla game. It is more like going to Vegas with a really huge bankroll.