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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Mark Marcellus who wrote (18210)	12/19/2003 12:36:58 PM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 78476

Mark and all, Thanks for responses. Though you are right that the cash hoard distorts MSFTs ROE, I don't agree that there is any guarantee that this hoard will be successfully employed. So far MSFTs new ventures (MSN, Xbox, etc.) were all money losers and there has not been any indication that things will improve in near future. The most positive development for MSFT would be large penetration of cellphone market. I have not idea whether this will happen. The best thing for MSFT now would probably be to increase the dividend. OK, I played with numbers a bit. If we subtract 40B cash from equity, we have ~27B adjusted equity. Then ROadjustedE is ~35%. If you assume that MSFT can continue ROadjustedE of 35% on the 27B adjusted equity, then you would have a good annual 20% annual return. I would be more conservative and assume only 25% adjusted ROE going forward. Which still puts MSFT in the "hold" area with ~9% expected annual return. Jurgis - your mileage may vary