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

To: DownSouth who wrote (14993)	1/23/1999 2:02:00 PM
From: t2	Read Replies (2) \| Respond to of 74651

Downsouth, Something has got to happen with MSFT and the rest of the Nasdaq from now til March. From the start of March, we should see some "preannouncements" from the G & Ks, that is, positive ones. I am hoping for an Intel split. Intel is probably the only other company with control over an industry as MSFT (Intel is still not in MSFT's league). It starting losing some of the dominance but but it recovered. They probably came to the conclusion, that consumers like the "intel inside" and don't mind paying a little extra for it. With over 90% of the market, they can set the price for the next PIII and the current high end PII. Top it off with the fact they don't have a "serious" anti-trust suit against them. Don't at all expect a MSFT split unless the stock drifts "downward" relative to the rest of the market. If it just tracks the market downward, forget about a split.--I don't think either scenario will pan out, that is , see a base forming at current levels and expecting it to move up slowly. A move up won't result in a split. I think there is only a small chance (25%)of a split in April, no matter what price it trades at. They want to maintain a steady upward move---and will take the necessary steps to accomplish this.

To: DownSouth who wrote (14993)	1/23/1999 4:31:00 PM
From: Bill Holtzman	Respond to of 74651

>>I contend that these margins are NOT the result of a formidable franchise, but are a result of the very nature of the software industry.<< "OBJECTION! There might be some truth to this argument!" (Govt) "Sustained! I'm warning the witness, I don't want to hear any more logic. Just the politics!" (Jackson) "It's not fair! They make too much!" (McNeally, etc.)

To: DownSouth who wrote (14993)	1/25/1999 12:12:00 PM
From: Vijay Mehta	Read Replies (2) \| Respond to of 74651

> Monopoly or not, that is the nature of the software industry. > Almost all the costs are sunk in the development of the product. > There are virtually no unit manufacturing costs. I'm in the software industry and I disagree with the some of the statements. I would say that product development cost is usually about 20% to 30% of the total costs. Sure, manufacturing costs are small, but a good percentage is customer support. A good 30% of shrink-wrap product's costs are in post-sales support. As an example, if one in ten Win98 users called Microsoft to take advantage of one free call to diagnose a problem or issue with the OS, the profits will dwindle, since each 30-minute call will cost Microsoft at least the full price of the software. The extent of this changes based on how well the product has been conceived, designed and tested. Pay attention to product conception, which requires a very solid understanding of the product feature requirements. Very often, the software does not have the important features, so a new cycle of development (with a repeat of all the overhead costs) is required. If the initial set of features are not large enough to get a mass market, you do not have the revenue to make improvements to gain an even larger market. The key is to find an unmet need and address that with market development behind it, so you can generate a large volume of users, with as few repeat or upgrade cycles. Where most companies fail is they rush products out - untested, less features, poor understanding of customer needs, so they are forced to repeat their product development lifecycle for the next release, or lose current customers. Microsoft has gained the economies of scale in that its software has a reach of close to 200 million desktops. Getting $5 profit from each one every quarter would meet their current bottom line. But the question is how they can generate that. Is there a powerful need for an upgrade, once you have the basics covered? Vijay