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

To: X-Ray Man who wrote (4581)	1/2/1998 1:49:00 PM
From: Shibumi	Respond to of 74651

Interesting exchange. A couple of notes on several points raised therein. >>2. Microsoft has more than offset R&D efforts with NT4. >False. Hard to get really interested in this given that no one seems to have facts...and I doubt that Microsoft would release the facts. The only way to look at this one to me would be what would be the market price another company (say, IBM) would be willing to pay for Windows NT and would that market price recoup the NT investment. >>3. NT growth is still 80%+ per year for a $2B product. >3. Was, no recent data I know of. Interesting thing here would be whether you think that NT is a linear growth or exponential (either rising or decaying) growth phenomenon. I read some IDC data the other day that showed NT was going to slow down significantly in the coming few years. Of course, as you note later, big research firms are often wrong. >>5. NT and Win95 serve different markets. People use NT because it is an awesome operating system. >5. Awesome, NOT. Hard to tell what the criteria is. Financially, NT seems to be an awesome product. In terms of high availability and scalability in large data centers, it seems to be much less than awesome. Of course, as an investor what interests me the most are the number of licenses sold and of course the revenue associated with those licenses. And where I think NT is interesting is that it's increasingly usurping Windows 95 sales -- which means a higher ASP per license for Microsoft. >>1. Look for Microsoft to grow 20% this year. End at 160. >1. 20% growth in MSFT this year won't justify a P/E=50. Of course, the question is whether Microsoft's earnings will grow at a faster than 20% clip or not. My personal bet (with which I'm sure you'll disagree) is that it will grow at a much faster rate than 20%. This growth will be driven primarily by two factors: increasing unit sales of PC's (due not to increased overall PC sales revenue, but due to increased penetration of PC's due to sub-$1000 computers) and faster than expected penetration of Windows NT in the business market. Of course, this is the fundamental point upon which everyone disagrees. >>2. Win98 WILL ship in second quarter and WILL ship as designed. >2. DOJ will kill Win98, look for Win99 or something completely different. In reading the proceedings, it's not clear to me at all that DOJ will go after something as ethereal as whether the browser can be integrated into the OS. To date, the argument has been over whether two different products can be bundled. I doubt that Klein and company really want to begin debating that at the binary level -- I think that the retail viewpoint is where they will stay. Again...just my opinion.

To: X-Ray Man who wrote (4581)	1/2/1998 2:42:00 PM
From: Ed Schultz	Read Replies (1) \| Respond to of 74651

>>2. Microsoft has more than offset R&D efforts with NT4. >>False As of August of last year they were ahead of the curve. (This from the company meeting, or did you not attend?) >>3. NT growth is still 80%+ per year for a $2B product. >>Was, no recent data I know of. As of August last year they were still doing roughly 120%. I am assuming they have slowed a bit since then. (They stated as much.) >>4. Yada, yada, yada Duh is right. Can't help it that Office is bringing in 50% of revenue and 75% of profit. >>5. Awesome, NOT. Awesome from a technical standpoint? Maybe not. (Though NT5 goes a LONG way to address a lot of the issues.) Awesome from a marketing standpoint? No comparison! >>6. Big research firms can wrong, often are. And analysts can be wrong, and brokers, and investors like yourself. Since no one can predict the future, one is forced to do surveys and make educated guesses. In the past year HP, KPMG, and IBM, three huge and influential companies, have jumped on the NT bandwagon. >>1. 20% growth in MSFT this year won't justify a P/E=50. Granted. But the PE is forward looking, not backward. Considering that growth in 1999 could easily exceed 50%, the PE is justifiable. Second, for the reasons listed in the last post, I think Microsoft will easily beat 20% this year. >>2. DOJ will kill Win98, look for Win99 or something completely different. The DOJ will not kill Win98. Win98 will ship on time and as designed. The only thing the DOJ can possibly do is to force Microsoft to ship a version without the IE integrated. This is not very likely and would still not prevent Win98 from shipping. And even if they did ship a version without it, who would want it? Get real! >>3. Possible. Likely. Spent a whole hour at the meeting talking about this very subject. >>4. Late 98. Anyone that thinks MSFT will triple by the 21st century is a good case study for wish fulfilment. We did just that in the past 2 years!!! On what? Given that E-Commerce is going to explode, given that NT5 is going to be a huge success, given that Web-TV sales have finally taken off this Christmas, given that PC sales are still predicted to grow at 15-20% per year, given that Microsoft only owns 4% of all software sales (todays USA Today), it would appear a no brainer that Microsoft should triple in size in the next 3 years!