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

To: ed who wrote (8539)	6/20/1998 12:30:00 AM
From: Ibexx	Read Replies (1) \| Respond to of 74651

ed, The apparent P/Es of Microsoft (as known by the public) have not factored in the deferred earnings which have grown to be quite substantial. Thus, the E part should be much bigger than what has been reported and, consequently, the true P/Es of MSFT--whether trailing or forward-looking--should be a lot lower than what now appears. Ibexx

To: ed who wrote (8539)	6/21/1998 4:10:00 PM
From: johnd	Read Replies (5) \| Respond to of 74651

MSFT is too expensive (a) The deferred earnings argument: MSFT will continue to have a percentage of revenue and earnings deferred forever from now. That is part of the game in the enterprise licence business. The argument of E being higher would be true if MSFT, starting next quarter stopped defering. That is not the case. In fact, I expect larger and larger percentage of revenues will get defered with time. (b) This quarter MSFT is project to report 47c. Even if it is a penny or two higher, it is still less than 25% EPS growth on an expected 15 - 18% revenues growth. The picture is pretty much same for rest of the year. (c) Look at those lawsuits. AT&T suit on NT SPA suit on Server business DOJ 20 state Attorneys Sun micro on Java ... (d) Interest rate environment could if gone unfavorably, first affects high PE stocks. (e) NT5.0 is likely delayed and won't affect revenues at least for another 12 months, so is office2000. PC growth worldwide is slowing partly due to Asian crisis. I am all LONG but I am low on my expectations for price increases and ready to weather about 5- 10% correction from current price of 95 on a wopping 60PE. johnd