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

To: Paul Fiondella who wrote (8665)	6/25/1998 1:35:00 PM
From: Phil Melemed	Respond to of 74651

Depends on what you mean by "copies" of Win98. Factors are at least: - Difference between full packaged product and just a license - Volume discounts Full retail packaged product and upgrade product probably cost the same, and there is distribution overhead. Price to hardware vendors for licenses is probably less, and I do not know who pays for printed materials and media. Profit is probably lower but on high volume. Price for corporate site-licenses for new users and upgrades is probably lower than full packaged product, since the only deliverable may be a license and a minimal amount of software & documentation, and probably have significant volume discount.

To: Paul Fiondella who wrote (8665)	6/25/1998 1:43:00 PM
From: Wizard	Respond to of 74651

>>Everyone knows that the cost of producing those copies is minimal. If the expenses of development are already taken then apart from marketing and sales expenses isn't there the potential of adding a billion or so in net profits in the next two quarters? Well that doesn't mean they stop R&D. They have new R&D projects which get expensed as incurred so you can't run it through the income statement like that. Moreover, Win98 replaces what would have been Win95 sales so its not all incremental. Then you have to tax the pretax income. Figure it runs through at the same margin as they are currently doing (with upside probable).

To: Paul Fiondella who wrote (8665)	6/26/1998 1:35:00 AM
From: Vijay Mehta	Respond to of 74651

>> Everyone knows that the cost of producing those copies is minimal. If the expenses of development are already taken then apart from marketing and sales expenses isn't there the potential of adding a billion or so in net profits in the next two quarters? The biggest cost will be the cost of supporting the product. If 10% of the users call Microsoft for technical support and use the 2 free support calls, and if each call lasts 30 minutes, that is one hour of a support engineer. If you include the overall cost of hiring a support engineer (including the high cost of employee stock options paid to Microsoft employees), it will be well into a $100-$150. I hear the support organization at Microsoft outnumbers R&D. Vijay