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Hell hath frozen over for Microsoft

Posted by: Aaron Pressman on September 28, 2006

There’s been sporadic, ongoing debate about how cheap Microsoft (MSFT) would have to get to attract value investors. But I never thought I’d see the day when Third Avenue’s Marty Whitman, from the pick ‘em apart like vultures school of valuation, would be there. Whoops. From Marty’s latest quarterly report (PDF file):

“The common stocks of Fair Isaac, Intel, Microsoft, and
Nabors were acquired at under 15 times earnings (after
deducting excess cash holdings from the equity market
values). In each instance, Fund management believes that
each issue has reasonable long-term prospects for
increasing earnings from operations and/or cash flow from
operations by more than 10% per year compounded.”

Microsoft had a minor crash at the end of April when it issued an earnings shortfall warning. Whitman’s report covers the three months from April 30 to July 31. The stock was stuck around $24 for most of that time. It’s already back over $27.

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