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

To: Reginald Middleton who wrote (10183)	8/19/1998 12:56:00 PM
From: Daniel Schuh	Read Replies (2) \| Respond to of 74651

Well, I understand software very well. Oh, right Reggie. After all, isn't Visual C++ is a Microsoft product? The proper Mind of Reg(TM) context for this particular insightful remark is available on request. Fans of the Regimodel 2000 valuation method might be interested in this article by a somewhat more widely known analyst. Internet investors, beware news.com This is Bill Gurley on CNet. An interesting quote: Any financial academician will tell you that the only proper way to value a stock is to predict the long-term cash flows of a company, discount those amounts back to the present, and then divide by the number of shares. As this is much easier said than done, many practitioners often shortcut the process using tools that serve as a "good enough" proxy for cash flow. One good example is the price-to-earnings ratio. It's not a perfect measure of cash flow, and there are many loopholes, but as John Maynard Keynes said, "I would rather be vaguely right than precisely wrong." Reggie apparently doesn't much hold with Keynes on this one. It may be easier said than done for mere mortals, but no sweat for Reggie, apparently emulating his idol Bill in transcending mortal bounds. Ignore PE, just trust that proprietary Regimodel 2000 to tell you the answers. Reggie, like Bill, only tells the TRUTH. Cheers, Dan.

To: Reginald Middleton who wrote (10183)	8/19/1998 1:52:00 PM
From: Gerald Walls	Read Replies (1) \| Respond to of 74651

I have stated before that accouting earnings should be ignored in valuing companies. I have personally run analyses of earnings against market value for high growth companies, and earnings tend to mean diddly. I have made it easy (and free for the stingy) to run thier own analysis as well. The Fools had a piece today that at least partly supports your argument in Dell's case, although Dell's earnings don't leave much to be desired. fnews.yahoo.com "GAAP accounting for earnings does not capture the $1.5 billion in cash that Dell has generated from its negative working capital float over the past 11 quarters." Once again, free cash flow (earnings before depreciation minus capital investment and working capital investment) ran in excess of reported earnings at Dell -- the 11th quarter in a row for that to take place, Befumo explained. At its highest point, free cash flow was running at 323% of reported earnings. All of this takes place by design at Dell, it's not just an accident.