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Money-making boxes Microsoft Google or Ebay are bargains. Which is best? April 4, 2007

Posted by deminvest in ebay, goog, growth stock, Internet stocks, investment, MSFT Microsoft stock, nasdaq, Nasdaq stock, Single stocks, stock I own, stocks.

Yes: bargains. Those healthy strong growing giants are cheap now. Does it make sense to you? To me no. Maybe it is because senior (old) stock-markets gurus walk toward the future with their head turned back toward the past. They are still scared of the .com bubble and can’t see great .com growing so strong and making so much money that they don’t even care for Wall Street and financial gurus.

With my simple fantasy I see a magic box.


There is a computer inside.

This magic box is connected to the Internet and there some software installed on the computer inside…

And guess what:

everyday there is a huge line of 300.000 people. Each one wants to throw a $1000 bill at the box. They don’t want to take anything out from the magic box for the money they have thrown at it.

Would you like be an owner of that box? I do!


Ebay and Google are such boxes.

On Sunday (or any other day) if all employees decide not to show up at Google or at Ebay, each company will get tens of Millions of dollars, because there are computers working in their box! No human intervention is needed by Ebay and Google to continue making money! Users from all over the World do all the human work, to submit items, to build new websites, to auction, to pay with their credit cards or with Paypal (which has now reached 150 million users)…

Then why do people at Google and Ebay show up in the morning? Simple! To make even more money! To make the software better, to attract new people willing to throw money at their magic boxes. And they succeed! Google doubles the money thrown at it every year; Ebay has been around for a longer time. They have been doubling for so many years, that they now “only” grow 30% a year!
Do you think it is easier to make money with those magic boxes, or to make let’s say… flying or building airplanes that need thousands of extremely skilled workers, who may make mistakes, may be ill, may go on strike, may be late at work or may ask for a raise ?

Guess what: I want a “magic box”! But… wait greedy proletarian! This magic box must be very expensive! Just for the rich not for you.

Guess what: a “magic box” is very inexpensive now!

According to Yahoo Finance:

Forward P/E for Google (GOOG) is only 21.91

and Forward P/E for Ebay is only 21.90.

If you compare it to Boeing (BA) P/E of 14.90 you will see there isn’t a big difference, considering the fact that Ebay and Google don’t have to produce airplanes. They just need to let their magic boxes work for them. Also considering that it is very likely that both companies will continue to grow fast in the next years, we will either see their P/E going ridiculously low, or we will see price of our shares skyrocket up.

But why did I mention Microsoft (MSFT)?

Is Microsoft a fast growing magic box? Not really, but it is something similar. Windows is on more than 95% of World’s computers. Now Microsoft has made Vista. Lots of work… But Vista is 100% paid now… And they will sell it for the next 6 years! It is like if Boeing had already built the airplanes that will be sold during the next 6 years… They are all there in the Hangar and all they need to do is sell them to airlines which do need them.

Microsoft is also like a “magic box”: Inside you find a billion installations of VISTA, nicely packed and ready to be sold… a billion of people is in line to buy a copy. Unlike, at Ebay and Google, employees need to show up in the morning at Microsoft. They have to do the “difficult” job of selling those licences that have been already made and that everybody wants!

And Microsoft is also less expensive than Google and Ebay:

its forward P/E is 16.34. And don’t think Microsoft isn’t growing: Quarterly Revenue Growth (yoy): 29.40% Quarterly Earnings Growth (yoy):24.10%. And that excellent growth is before Vista.

Oh I forgot a little detail: Google has total Cash $11.24 Billion, Ebay $3.20 Billion and Microsoft $ 26.40B. Poor Boeing has debt instead: about $3 Billion of debt as a matter of fact. This should tell us about who has an easier job to do.

I already own GOOG, EBAY and MSFT. This time I choose to reinforce on Microsoft.

It seems the best bargain to me, it pays 1.4% dividend yield and is also the safest harbour. Who could possibly stop Microsoft from selling their billion Vistas?

I will throw $2000 to buy a few more Microsoft shares in the next five minutes.


1. deminvest - April 4, 2007

I just bought 70 Microsoft (MSFT) shares at 27,75 each, spendig $1942.5 Let the force be with me… and with Bill and Melinda Gates, who are, by the way, doing lots of good charity.

2. deminvest - April 4, 2007

I found an intersting post about “the big three”. Only I included Microsoft instead of Yahoo in the list, because Yahoo is suffering to much of Google’s competition to be a winner like Microsoft, Ebay and Google itself.

Here is the link:
And here is something I don’t really undestand about blogs, the trackback:

3. One more growth stock - Genetech (DNA) - is becoming dirt cheap « Democratic Investments by the people for the people - April 13, 2007

[…] week I discussed how this weird funny thing is happening with Google and Ebay (I must not forget to buy a pair more GOOG […]

4. Dennis Goedegebuure - April 17, 2007

“Then why do people at Google and Ebay show up in the morning? Simple! To make even more money! To make the software better, to attract new people willing to throw money at their magic boxes.”

I’m showing up at work, not only for the reasons stated above here. It’s because eBay is really changing peoples lives. Can you imagine that 1.5 million people worldwide are living from what they buy and sell on eBay!
Being part of such a big social impact is an incredible feeling.
And besides that, eBay gives me the opportunity to grow.

5. deminvest - April 18, 2007

Sorry Dennis,

I did not mean to underestimate your enthusiasm for being at Ebay. I just wanted to make clear that, unlike traditional companies, most of Ebay staff is working for future developments. Thank you for your comment. I liked it very much and I made a new post out of it:

I quoted you as an EBay staff member. I hope you don’t mind.


6. Directly from EBAY staff-member to Deminvest: another good reason for owning EBAY: Enthusiasm of young smart people who work there « Democratic Investments by the people for the people - April 18, 2007

[…] quotes Deminvest post about EBAY, Google and Microsoft: “Then why do people at Google and EBay show up in the morning? Simple! To make even more money! […]

7. Leonard - May 27, 2010

True! Even in the wake of this crappy VISTA product, MSFT, continues to be THE powerhouse software vendor in the world. Those improvements over XP seem to have won the users over so we don’t hear many outcries against it. We’ve become Zombies, slaves to the multitude of mini-Frankensteins showing up at the Seattle
castle to “create” new digital monsters. Where is the mob with their torches when you need them??

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