8/28/2023 0 Comments Skype stock employees![]() ![]() So before we run to crucify the management of these companies and call them “value traps,” we should actually take a careful look at their fundamental performance. – have seen their earnings and revenues triple and P/E’s collapse. But most stocks in that category – take Wal-Mart, Cisco, Medtronic, etc. Microsoft falls into the broad category of high-quality stocks that were incredibly expensive in 1999 and have not gone anywhere since (and have often declined, as is the case with Microsoft). ![]() Skype only generates $800 million in revenues, putting today’s price tag at over 10x revenues and some much, much larger multiple of earnings – a very lofty valuation. ![]() eBay would have parted with Skype for a fraction of $8.5 billion as recently as 2009 in fact it did, it sold 70% of it to private equity, valuing Skype at $2.8 billion, a third of what Microsoft is offering today. Microsoft had the chance to buy Skype for a long, long time. Private equity and eBay, which still owns 30% of Skype, may actually sell, unless Google or someone else rushes in with a competitive bid. Today, while in NYC still playing catchup with the jet lag from the European trip, I read a headline: “Microsoft is near a deal to buy Skype for $8.5 billion.” Microsoft is pulling another “Microsoft”, though this time it may actually succeed. Its stock is at $18, almost half the price that Microsoft offered, and I find the company only mildly undervalued if you give a significant value to the assets and Alibaba Group that Yahoo! acquired in 2006 and which were not worth nearly as much in 2008.) (I spent some time looking at Yahoo! last week. What worries me is that a company in my portfolio will pull a “Microsoft” – announce a stupendous, “transformative” acquisition, like the $48 billion takeover of Yahoo! that Microsoft announced in 2008, but that Yahoo!’s management was too … (fill in the blank) to accept. The companies that have a “deliver the quarter” culture often just play their financial statements as a musical instrument. I don’t worry that my companies missed their quarterly guidance by a few pennies – running a business is an art, and things don’t usually work out in a precise, linear fashion. When I wake up in the morning and check news for the companies I own, I worry. ![]()
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