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To: sun-tzu who wrote (128475)	10/10/2001 1:09:12 PM
From: Mark Adams	Read Replies (1) \| Respond to of 436258

Why do these companies and the tech sector generally command higher multiples than, say, General Motors (GM:NYSE - news - commentary - research) or General Electric (GE:NYSE - news - commentary - research)? The answer used to be that they were high-growth companies. But we now know that they're low-growth companies -- at least for the foreseeable future. They may become high-growth again, but they're cyclical at best, like Alcoa (AA:NYSE - news - commentary - research). Why do they command a much higher multiple than other cyclicals? First, if your going to claim tech is cyclical, then you should expect high multiples at the bottom of the cycle, and low multiples near the top. Second, you can't compare a good tech to the likes of GM, as the profit margins are different. Someone somewhere said 'their net margins are higher than some/most gross margins' in relation to comparing price to sales of a tech. Was Don Lloyd, now that I remember. A good insight... Message 16481031 Just to rant on a bit further, I've heard it said that GM/F are really employee driven pension funds, due to the extensive power of the unions. In some cases, companies are run primarly for the benefit of management, other companies for the employees. It may even be rare that a company is actually run for the benefit of the shareholder.