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

To: Mike Milde who wrote (9685)	7/26/1998 10:34:00 PM
From: ed	Respond to of 74651

No, you are completely wrong. The worldwide PC market is much larger than the AUTO market, because more people can afford PCs, because as new softwares comes to the market , you will need more powerful hardwares to run the most advanced software, which will obsolete the existing hardwares and generate additional upgrading cycles. 1) Five years ago, 486 is the most advanced processor, and now the Pii, so a new upgrading cycle is comming from 486 to PII. 2) There are many and many family and individuals in this world do not have a pc, and as the price of pc keep dropping, more and more people can afford, this will expand the size of PC market. 3) More and more people own more than one pc, i.e one at home, and one at work. 4) More and more families had more than one pc at home, i.e John want to go to the internet, Mary wants to use the PC doing homework, and Bob want to use the PC for entertainment. So, we need at least three pcs at home so that everyone can do their own favorite things with PC in the evening. And PC is getting cheaper , and cheaper, and we can afford to own more than one or even three PCs at home. This of course will make the PC market even larger. 5) Bottom line is each PC will need one copy of O/S software to run. I hope you understand now. So, if the unit shipped will grow 15% in 1998, then it means MSFT's revenues from PC related OS sales will grow by 30%, why ?every new pc shipped 1998 will have one copy of Win98 installed, here is 15% more revenue compare to 1997. Let's assume that 10% of the PCs shipped in 1995, 1996, 1997 will upgrade to Win1998 (Here I did not count the PCs shipped in 1993, 1994, most likely , the owners of those PCs will have the hardware upgrade later and with have win98 installed) in 1998, and here you will get another additional 15% of revenue. NT4 is continuing generate good revenues for MSFT, and NT5 will be released in 1999, which will be sold at a much higher price than win98, this means higher margin and more revenues. How about the revenues from -Commerce in the years to come ? To evaluate MSFT's valuation, you have to see how fast it can push new products to the market, and its profit margin.The traditional PE strategy did not count here !!!