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

To: Reginald Middleton who wrote (8570)	6/23/1998 10:37:00 AM
From: Harry Sharp	Read Replies (1) \| Respond to of 74651

Appeals court overturns Microsoft injunction June 23, 1998 10:04 AM WASHINGTON, June 23 (Reuters) - The U.S. Court of Appeals on Tuesday overturned an injunction that prevented Microsoft Corp. MSFT from requiring computer makers who use its operating system to also use its Internet browser. In a broad ruling, the appeals court decided 2-1 that a lower court made both procedural and substantive errors in imposing the injunction.

To: Reginald Middleton who wrote (8570)	6/23/1998 10:53:00 AM
From: Wizard	Read Replies (2) \| Respond to of 74651

>>I don't think you are differentiating between reported accounting earnings and actual operating profit. I am differentiating, its just that I am saying that if you understand what is going on behind the reported EPS number, you just need to adjust the multiple to make it 'fit' the reported EPS number (and in theory get the same result as using an unadjusted multiple on an adjusted EPS figure). >>Yahoo and AMZN sales have a high correlation between market value to sales yet a negative correlation between earnings and market value. Good case in point. Investors are clearly 'looking through' the reported earnings and valuing companies like YHOO on their hypergrowth revenues and targeted operating model - op margins in the 30%+ range. What you are saying is that YHOO and AMZN mktval/sales ratios are more consistent (is that right?). Since mktval/sales is above any reinvestment expenses, I agree that this should correlate more closely for most companies where they have not achieved their sustainable operating model. This makes intuitive sense. However, YHOO and AMZN are extreme cases. I am curious how AOL turned out in your study. Their mktval/sales multiple has fluctuated rather significantly over the last few years. >>If your asertions concerning P/E's are true, should the P/E have a high correlation to market value and the consensus estimate? I don't have any assertions regarding P/E's based on printed EPS (whether estimates or as reported). >>If you start adjusting for non-cash related charges, then you are now not dealing with accouting earnings, but reconciled income. We are saying the same thing, but I don't think you are differentiating between reported accounting earnings and actual operating profit. When I am looking at the earnings, I am (attempting to at least) determine actual operating profit. When I am referring to P/E's, I adjust my P/E discussion to refer to which type of earnings the person I am talking to is referring to. >>re. ROIC vs. WACC Just curious if you like this analysis for most companies (non-internet, non-hypergrowth-in-reinvestment-mode companies)