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

To: D.J.Smyth who wrote (5569)	3/25/1998 4:17:00 PM
From: Paul Shread	Read Replies (1) \| Respond to of 74651

Darrell, thanks for your post. I don't know if a Fed hike would destabilize world currencies, but I bet Greenspan would sure like to see the U.S. cool off.

To: D.J.Smyth who wrote (5569)	3/26/1998 1:54:00 AM
From: Jeff Goodman	Read Replies (1) \| Respond to of 74651

Darrell, Here's my rough-cut analysis of where Microsoft stands, valuation-wise. >it is difficult for me to separate msft from dell, but in the cfo's talk, he apparently did that while stating that pc growth remains strong. msft, with a "monopoly" should begin to grow at the rate of the overall tech market. dell, having no monopoly can still capture market share (as i'm told they are continuing to do). The big difference between Microsoft and Dell is that (in the parlance of Geoff Moore's "Inside the Tornado" and "The Gorilla Game"), Microsoft is the biggest, baddest gorilla on the planet, and Dell is not. Dell actually (again, from "The Gorilla Game") isn't even playing a "gorilla game"; as you mentioned, they don't have a proprietary product, so while they can still capture market share, they can also lose market share fairly easily. Microsoft can't/won't. Here's my take on the next 12 months and why I am still bullish on Microsoft in the long-term: 1. Win98. Not as big a winner for them as Win95, but they are still going to make a lot of money on it. 2. NT5.0. Another solid winner for them as they continue to win market share away from Unix in the server market. 3. Office 98 for Macintosh. Think about these numbers (!): a user/potential customer base in the 10 - 20 million range, and these folks are _starved_ for an upgrade to MS Office. They will buy big-time. Let's assume 5 million upgrades/sales in the first 12 months. Assume MS makes only $100 profit per package (although I believe that number is very much on the low side). That's an extra $500 million in profit, which works out to about $.21 per share. Compared to next year's eps estimate of $1.99, an extra 10.5% tacked on looks good to me. 4. Office 98 for Windows. More upgrade money. 5. Intel may be reeling from the decrease in microprocessor chips--even with the increased unit volume this brings--but Microsoft still gets to sell a copy of their OS for every system sold. More systems sold, more OS'es sold. 6. Microsoft is a gorilla in their world. Oracle is a gorilla in theirs. Look for those two worlds to begin colliding in a serious way. Look for Microsoft to do some serious damage to Oracle in the next year or two. Oracle's resulting valuation/market cap loss is likely to be Microsoft's gain. 7. There are a _lot_ of smart and savvy people at Microsoft whose compensation depends heavily on the stock price continuing to rise. Another good thing to have on our side. In "The Gorilla Game," Geoff Moore presents a persuasive case as to why you can expect Microsoft (and other gorillas) to continue rising long after traditional quarterly market analysis pegs them as being overvalued. They're not overvalued, and the smart money--believe it or not--is still looking for them to rise significantly over the long term. Regards, Jeff