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To: Sun Tzu who wrote (303)	11/18/1998 12:43:00 PM
From: xiaxia	Respond to of 10713

You analysis is quite right. But history is on their (MSFT, DELL) side. After I got out of DELL in 1996, I have thought about shorting DELL many times. I am glad that I did not. Even if Microsoft loses all its court battles, the impact on its stock would be more of psychological than financial. I've never liked the company but I made a bit of money out of it. I still have my Novell shares purchased in 1994. Well, maybe a somewhat equivalent but safer play than shorting MSFT is to long on NOVL, SUNW, and NSCP.

To: Sun Tzu who wrote (303)	11/18/1998 5:21:00 PM
From: Sun Tzu	Read Replies (1) \| Respond to of 10713

More on why I think MSFT is a good long term short: Warren-Boulton's direct testimony lays out the economic arguments for the government's case, which charges Microsoft with trying to maintain and extend its monopoly in operating systems into other areas, such as the Internet, that could pose a threat to its monopoly. He will likely take the stand Thursday morning for his cross-examination by Microsoft's legal team. In his written testimony, Warren-Boulton pointed to Microsoft's high market capitalization and high profit margins as proof that Wall Street views Microsoft as a monopolist. Among the Fortune 500 companies, he said, Microsoft ranks 137th in revenue, 15th in profits, second in market capitalization and first in profits as a percentage of revenues. Investors like monopoly rents, which is the extra revenue above the market price that a monopolist is able to extract from consumers. Warren-Boulton quoted a Microsoft document that said the price of Windows had risen for the past 10 years while other computer component prices have plunged. This is of course something that many of us know instinctively. My point here is not however to bash Microsoft, rather to see how one may make money out of it assuming that (a) the above is true and (b) that Microsoft will lose (some of?) its monopoly power. What you are seeing here are the cracks in the wall. Just as Rome was not built or destroyed over night, Bill Gates' empire will not be abolished quickly either. What will happen, is a constant battle between few (but increasing number) who begin to lose faith in MSFT and those who have witnessed Microsoft's power and the stock's performance over the past few years and have faith that somehow Microsoft will maintain its monopoly power. This second group will be decreasing in number. If I am right, you should notice a slow down in the stock performance of MSFT compared to its past. Then you will see a drop. Then the faithful will deem MSFT as cheap and a buy because "this is still a strong company with a lot of cash and a great product line and management". This rise will not surpass the previous trading range. And then it will fall again. This type of cascading waves will continue for sometime. The fair price for MSFT is the value of its business units minus its monopoly premium. Should DoJ manage to destroy MSFT's monopoly via say a break up of the company, this will be the price that MSFT should trade at. Actually that price may be still too rich, as we don't know how competitive Microsoft divisions are without their monopolistic teeth. Sun Tzu