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

To: Dorine Essey who wrote (6034)	4/23/1998 7:13:00 AM
From: Brian Malloy	Read Replies (1) \| Respond to of 74651

To all, a nice little editorial here on MSFT over the long term. The full link for portions not dealing with MSFT is provided at the end. FOOL ON THE HILL An Investment Opinion by Louis Corrigan Hunting Gorillas Since the day Microsoft (Nasdaq:MSFT - news) went public in 1986, it has probably never looked inexpensive based on standard investment criteria. And yet it's been the quintessential great investment of the last decade, with the company's market cap rising from two-thirds of a billion dollars at its IPO to $240 billion today when it trades at a price-to-earnings ratio of about 63. The software giant is only one of many high-tech firms that trade at a P/E multiple that makes many value-oriented investors cringe. And yet, many of these companies experience long periods of accelerating gains in market share, rising margins, and eventually, the industry position to muscle into entirely new markets when growth in the core business begins to wane. In other words, conventional notions of valuation don't seem to work because they are based on ideas of competitive restraints that don't apply to high-tech the same way they do in other industries. Microsoft might teach us, then, that some strong technology businesses get stronger over time, and this potential is often not sufficiently factored into a stock's price, lofty though it may appear. Still, it's important to determine exactly why this should be so and which cases this lesson might cover and which ones it won't. After all, every high-tech investor can reel off a string of examples where the highflyer crashed and the wreckage was not pretty. For every Microsoft, there's at least one Novell (Nasdaq:NOVL - news) . For every Cisco (Nasdaq:CSCO - news) , a Shiva (Nasdaq:SHVA - news) . Message 4167838