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

To: johnd who wrote (8535)	6/19/1998 7:40:00 PM
From: Elroy Jetson	Respond to of 74651

Isn't their near term price target 99 1/8 ?

To: johnd who wrote (8535)	6/19/1998 7:42:00 PM
From: Hal Rubel	Read Replies (4) \| Respond to of 74651

Microsoft's Unusual PE Ratio RE: '"At 50 PE on trailing earnings, a price of 84 and on 50 PE of entire fiscal year earnings of 1.77, a price of 88.5; So why are we already at 94.6? Anyone know?" Microsoft is the great Cult Stock of our time. There are people who's only conception of the entire computer revolution is through their limited Microsoft related experiences. Besides, Microsoft as an investment has been successful so far. I say so far, because Microsoft has entered a new stage in its natural evolution as a corporation. A significant saturation point has been reached. For the past couple years, Microsoft has not been able to fully reinvest its immense earnings into it's core business. Rather than pay enhanced dividends to stockholders, Microsoft has diversified its capital structure into more ordinary and more risky fields of endeavor. What is now just a tail, will eventually wag the dog. Anything that Microsoft does from now that it can not "integrate" into its core OS business will be subject to the vagaries of ordinary business and will be valued accordingly. Already, outsiders, such as myself, can clearly see that the limits of integration have been approached. This fact is evidenced by the recent expressions of concern by federal and state regulators, legislators, and a surprisingly large portion of the disinterested general public. Though the public retains a favorable image of Microsoft, it does not hold Microsoft's leader in a heroic light along the lines of Thomas Edison and the like. In fact, though the recent N. Y. Times poll revealed that the public held an overwhelmingly favorable impression of Microsoft as a company, they also were of the overwhelming impression that Microsoft had reached Monopoly Status in the market place. This can only mean that regulators will eventually prevail in limiting Microsoft's as yet unlimited potential in the eyes of investors and the public at large. I would presume that Microsoft will be increasingly viewed as a successful conglomerate and will be valued accordingly. A realistic PE closer to 30x rather than the current 50X should be the case within as little as two years. After all, its only a mater of time before a setback in a non-OS investment has a noticeable effect on earnings. At that point, the investor re-evaluation will begin in earnest. However, I do believe that Microsoft's Cult Following will cushion the blow for the slower investor during the transition. Hal