A hot report, a legal victory and the expectation of strong earnings sent Microsoft’s stock soaring yesterday, making it the first company ever with a market value of more than $500 billion.
Chairman Bill Gates – the richest man in the world – saw the value of his Microsoft stock sneak up on the $100 billion mark as his company reached a market capitalization which would make it the world’s ninth-largest economy if it had a constitution and a parliament.
Having climbed as high as 99 in extremely heavy trading, Microsoft closed up 51/16 at 997/16, giving it a value of $507 billion – 34 percent more than the entire economy of the Netherlands.
If the stock hits 10027/32, Bill Gates’ 991.7 million shares – 19.4 percent of the company- will be worth a cool $100 billion. The company’s stock price has increased nearly 500-fold since its IPO in 1986.
At the current stock price, Gates’ shares – excluding all of his other holdings – are worth $98.6 billion.
Yesterday’s surge was sparked by the expectation of strong earnings to be released Monday and speculation that the company would issue a tracking stock for its Internet-related businesses.
William Epifanio, who covers Microsoft for J.P. Morgan, said he is predicting the company will announce earnings of 37 cents a share on Monday, but would not be surprised if it was a penny higher.
Epifanio said issuing a tracking stock for the company’s Internet plays would make sense, and the reaction of the market yesterday showed investors and traders agree.
“I think their Internet businesses have $750 million to $1 billion in them and if you apply the Internet multiplier of roughly 60 or 70, you’re looking at what could be a $60 billion valuation,” he said.
Epifanio said a tracking stock would give the software maker a valuable currency to acquire more Internet properties through stock swaps, as well as boost the overall share price by showing the real value of its online assets.
The company could also give prospective executives options on the new tracking stock as an enticement for signing with Microsoft’s Internet companies.
Meanwhile, a jury in Bridgeport, Conn. found the software behemoth not guilty of antitrust law violations in a $263 million lawsuit brought the small but scrappy Bristol Technology Inc.
Although not a great deal of money was at stake in the Connecticut trial, a decision against Microsoft could have been symbolically devastating as it contests a landmark antitrust case brought by the U.S. Justice Department.
“On a day like today, the legal victory was the cherry on top of the ice-cream sundae,” said Epifanio.