Article Abstract:
The value of Microsoft Corp's stock is expected to soon surpass that of IBM. At the end of trading on Jan 14, 1993, IBM's 570.9 billion shares were quoted at $48.75 apiece, for a total value of $27.83 billion, compared to a $91.25-per-share price for Microsoft's 299 million fully diluted shares, giving it a value of $27.28 billion. Fast-rising Intel Corp has a value of $24.47 billion, based on a closing price of $112.75 for each of its 217 million fully diluted shares. Analysts say Microsoft's and Intel's surge and IBM's decline speaks volumes about the rapid changes in the technology business over the past 15 years. Microsoft's ascendency indicates that software, not hardware, drives the technology business, says one analyst; but another analyst says that Microsoft might be threatened by Intel, whose microprocessors are for all intents and purposes the computers of today.
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Article Abstract:
Wall Street is apparently concluding that high-tech shares should not be treated as growth stocks; they should trade at their often below-market multiples of earnings. Tech stocks were already in some trouble when they encountered unusual difficulties in Dec 1989. Problems were exacerbated by bad news from IBM, Compaq Computer Corp and Apple Computer Inc. Tech stocks were jolted again on Dec 13, when Shearson Lehman Hutton Inc pulled Microsoft Corp from its recommended list, placing the stock with those likely to match rather than outperform the market. In the 1970s, investors were willing to pay high prices for high-tech stocks, expecting sales growth and earnings increases. Now, investors seem to regard technology stocks as 'cyclical growth' stocks, realizing that the technology sector might no longer represent the fastest-growing segment of the economy.
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Article Abstract:
Professional investors recommend buying high technology stocks of companies that are 'cannibals.' Such companies have 'savage entrepreneurial appetites' and will 'destroy the past to feed the future.' Some investors say Intel Corp is an archetypal cannibal. When clone manufacturers started copying Intel's 80386 microprocessors, Intel responded by slashing its prices, and then Intel developed a new generation of chips. According to one industry observer, Intel plundered, burned and destroyed the 386 market behind it. Other companies that are called cannibals include Microsoft Corp, Novell Inc and Parametric Technology Corp. Companies that hesitate to cannibalize their pasts and try instead to preserve aging product lines are 'captives.' Such companies lack the fierce managerial aggressiveness that characterizes cannibals.
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