THE DAY AHEAD: Love or hate Microsoft, it has lined your pocket

Larry Dignan
4 min read

"MSFT is and always has been a great long term investment. I've been accumulating shares since 1992."

That comment comes from a reader defending Microsoft (Nasdaq: MSFT) against its peanut gallery of critics. The reader, a dentist from Seattle, isn't alone with his Microsoft support. Nevertheless, he was pelted by a host of TalkBack critics calling Microsoft an evil empire that should be split into pieces.

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Love or hate Microsoft, it has lined your pocket

It's quite a dichotomy. The company many folks love to hate has even lined the pockets of its bashers.

You can love or hate Microsoft, but chances are pretty good it has boosted your retirement fund and your personal balance sheet. Even a Linux programmer who happens to own an S&P 500 index fund indirectly owns shares of Microsoft.

It's Microsoft's 25th birthday on Sept. 5, and many folks will be wishing the company well. And they should. Since going public March 13, 1986, Microsoft has made investors a bundle.

"When Microsoft falls, everybody does. All in all, nobody wants to see Microsoft fall, including Sun and Oracle because those guys are just imitating what Billy has been doing."

No argument here. Consider the following:

  • More than 37 percent of domestic equity mutual funds own Microsoft shares, according to mutual fund tracking firm Morningstar. And that's after some fund managers pared their holdings.
  • Microsoft accounts for 1.6 percent of equity fund assets. That's a cool $3.44 trillion, said Morningstar.
  • One share of Microsoft at its IPO price of $21 would have turned into 144 shares valued at $10,080. One hundred shares would have made you a millionaire even though shares have recently taken a hit on antitrust and growth concerns.
  • In 1985, the company reported sales of $140 million and a profit of $24 million. In 1995, Microsoft had sales of $6 billion and a profit of $1.45 billion. The software giant just closed out fiscal 2000 with sales of $23 billion and a profit of $9.4 billion. Microsoft had $23.8 billion in cash through June 30.
  • Microsoft can single-handedly move the Nasdaq, Dow Jones industrial average and Standard & Poor's 500 stock index, which is Wall Street's supreme benchmark.

    "Why is the government trying to dismember one of the greatest business entities of all time?"

    Oh yeah, there's that pesky antitrust issue. No matter how much money Microsoft rakes in, it is seen as a monopolist, competition-killing company. In fact, many folks, who incidentally have probably profited from Microsoft's monopoly, would love to see the software giant carved up and put out of business. Most of America doesn't see it that way.

    Although this antitrust trial will continue to go on forever (and we do mean forever), the critics should be careful about what they wish for. After all, it is your 401(k), we're talking about.

    A hobbled Microsoft could significantly derail Wall Street and Main Street. As a percentage of all mutual fund assets, Microsoft is fourth behind Cisco, General Electric and Intel.

    Indeed, there is evidence that the government's antitrust crusade has already made Microsoft more mellow -- and that's bad news for investors. Microsoft is a laggard in business-to-business, behind on interactive TV and is a third place player on the Web. To compound the problem, Microsoft is showing signs of slowing growth.

    You can't debate the success of the last 25 years, but what will the next quarter century hold? Microsoft growth could slow and investors could put the company in IBM's league -- a big tech player, but not the tech player. Simply put, the dynasty could be over.

    Then again, folks have been predicting the demise of Microsoft forever. Microsoft was allegedly overvalued way back in 1995. The bottom line? Microsoft has always paid attention to its bottom line, and investors aren't going to forget it. One ZDII reader said anyone who bailed on Microsoft now would be an "investing idiot who listens to hype and makes decisions based on emotion, rather than fact."

    "Microsoft has seen months of less than stellar periods of earnings in the past, and have still come back to kick everyone else's tail. They are crying all the way to the bank. And that is a short trip, because they are the bank."TDAIN
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