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Strategies & Market Trends : Dave Gore's Trades That Make Sense -- Ignore unavailable to you. Want to Upgrade?

To: Dave Gore who wrote (9617)	7/17/2002 4:49:06 PM
From: Dave Gore	Read Replies (1) \| Respond to of 16631

MSFT ---- "Microsoft's just too cheap" By Susan Lerner, CBS.MarketWatch.com Last Update: 4:33 PM ET July 17, 2002 NEW YORK (CBS.MW) -- Given the market's steep sell-off it was only a matter of time before the analysts began weighing in with their "too cheap" calls. Bernstein: Anyway you cut it, Microsoft's too cheap For Microsoft, that time came Wednesday with some bullish comments from Charles Di Bona just as the software giant prepares to release its fourth-quarter earnings after the closing bell Thursday. After rising to an intraday high of $53.30 Wednesday, Microsoft shares finished the day up 75 cents at $52. "The current stock price does not fully account for Microsoft's growth opportunity," the Sanford Bernstein analyst told clients. "We urge investors to get into this stock before the market sentiment and perception catch up with the reality of the company strong short and long-term positioning." By almost all traditional valuation metrics, he said, the stock (MSFT: news, chart, profile) is trading at or near historic lows for the past five to 10 years and is attractive relative to the market. Yet, while he said investors tend to look at forward multiples for valuing software companies, trailing multiples can still be useful for assessing valuation relative to historical precedents. In terms of trailing 12-month price and earnings metrics, Di Bona said he sees Microsoft trading at levels not generally seen since the mid-1990s even before the bubble run-up. Comparing the company to the prevailing multiples of the S&P 500, the stock is also at or near historical lows as it also is on a cash-flow basis, he added "We believe Microsoft is approaching these levels not as the result of a slow growth business model but rather despite significant growth opportunities and a strong core franchise, which the market appears to underappreciate," Di Bona said. "We would expect MSFT's valuation to expand as growth reaccelerates as the company's .NET framework becomes a key player in the Web services platform market." Still, Di Bona, who rates the stock an "outperform," lowered his price target on the shares to $65 from $70 to reflect recent declines in the overall market. As for the impending fourth quarter fiscal 2002 earnings release, Di Bona said he expects the company to beat earnings per share estimates. He also foresees the company coming in ahead of expectations for fiscal 2003 as is evident by his $2.04 fiscal 2003 forecast, above both the company's outlook and the $1.92 consensus estimate of analysts surveyed by Thomson Financial/First Call. Merrill Lynch's Chris Shilakes also weighed in with comments on Microsoft ahead of the earnings release, telling Merrill clients he expects the company to post fourth quarter 2002 results in line with his $7.09 billion revenue and 42 cents per share earnings forecasts. He also said he expects his $1.92 fiscal 2003 forecast to remain intact. "Near-term trading action in Microsoft stock will depend more on the fiscal 2003 outlook than the fourth quarter 2002 metrics," he said. "Microsoft has previously offered a forecast of modest PC unit growth in the first half of fiscal 2003. Management may temper that outlook slightly given the ongoing difficult PC environment, which we believe is already in the stock." Shilakes carries an "intermediate-term buy, long-term strong buy" recommendation on Microsoft shares.

To: Dave Gore who wrote (9617)	7/17/2002 4:50:01 PM
From: J D B	Read Replies (1) \| Respond to of 16631

International Business Machines Corp. (NYSE:IBM - News) on Wednesday said its profit fell sharply for the fourth quarter in a row, as corporations worried about their own stagnant bottom lines spent less on technology. IBM, which sells everything from computer software to microchips to computer services, said it earned 3 cents per share in the second quarter, down from $1.15 per share a year earlier. The No. 1 computer maker said it earned 84 cents per share excluding charges of 81 cents per share to cover job cuts, a reorganization of its microelectronics division and for its money-losing hard disk drive business. The Armonk, New York-based company, whose results are a bellwether for the influential technology industry, announced plans to sell most of its hard-disk drive assets to Hitachi Ltd. for $2.05 billion at the beginning of June.