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Technology Stocks : PSFT - Fiscal 1998 - Discussion for the next year -- Ignore unavailable to you. Want to Upgrade?

To: Mr Logic who wrote (207)	3/11/1998 12:42:00 PM
From: Chuzzlewit	Read Replies (2) \| Respond to of 4509

Patrick, there are no decent valuation models for growth companies. For a model to mean anything it must capture anticipated growth in free cash flow for the foreseeable future and beyond, the current long-term outlook for interest rates, and the perceived riskiness of the anticipated cash flows. Now consider this: if you examine companies that are growing their top lines very slowly (like IBM), they still command forward-looking multiples which on a percentage basis are considerably higher than PSFT's. We are dealing with a convergence of forces which is propelling the market forward. First, we have a very benign inflation rate. Second, we have modest (although some would argue still too high) interest rates. Third, we have massive influxes of cash into the market in the form of 401-K's, IRAs Keoughs and other vehicles, and these influxes are expected to accelerate for the next decade at least. On top of that wonderful foundation we have a company positioned to exploit a huge market which is also experiencing a confluence of forces. There is a push to increase productivity in businesses, there is the y2k problem which is probably accelerating the trend to overhaul systems rather than simply patch them, there is the conversion to the euro, etc. If I weren't a bull in this market, I would sit on the sidelines. Being a bear is inviting the herd to trample you, because you are not betting against the business, you are betting against the market. Regards, Paul