The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (July 18, 1997) After the bell yesterday, software giant MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> posted fiscal fourth-quarter earnings ahead of Wall Street estimates again. Recording an 89% increase in earnings, Microsoft earned 80 cents a share, a penny better than First Call's consensus estimates. (A penny per share's not much until you consider that we're talking about 1.2 billion shares outstanding.)

But alas, the stock dropped considerably because in the secret corridors of Wall Street, there was a top-secret, spread-the-rumor-at-the-water-cooler, money-under-the-table-in-unmarked-bills "whisper number." In other words, analysts don't want to look silly by over-estimating the earnings publicly but go about spreading a more optimistic estimate to their high-dollar clients. In this case, Microsoft didn't live up to the whisper number even though it surpassed the official estimates and the stock gave back a healthy portion of its gains created earlier this week in anticipation of the report. Officially, of course, all the analysts claim victory by predicting the actual earnings even though they believed a much more aggressive number to be imminent. Real accountability there.

One thing cheering several analysts, though is that the company recorded quite a bit of deferred revenue that didn't show up in this quarter's earnings. The cushion of deferred revenue for Microsoft is roughly $1.42 billion, an increase of $133 million. That's roughly 7 cents a share.

In the conference call, the company warned that revenue growth could slow in the future, but this is by now such a consistent refrain as the company tries to reign in analyst expectations each year. A pretty fine investment strategy over recent years would have been to buy Microsoft after every one of the warnings.

As we head into the weekend, there's one change to be made to our database stocks. For next week, delete BURLINGTON COAT FACTORY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BCF)") else Response.Write("(NYSE: BCF)") end if %> and add MEN'S WEARHOUSE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUIT)") else Response.Write("(Nasdaq: SUIT)") end if %>. The following is the new Investing for Growth order:

Helen of Troy (HELE)
Western Digital (WDC)
Dell Computer (DELL)
Quantum (QNTM)
Compaq Computer (CPQ)
T. Rowe Price (TROW)
Franklin Resources (BEN)
Robert Half Int'l (RHI)
CDI Corp (CDI)
Dollar General (DG)

Fool on!

Monthly Growth Screens
(Jan. 3 to present)
45.20%  Relative Strength  
22.36%  S&P 500 Index  
17.87%  Unemotional Growth  
15.81%  Low Price/Sales  
15.48%  Investing for Growth  
 7.03%  EPS Plus RS  
 4.63%  YPEG Potential  
-9.17%  Formula 90  

Annual Value Screens
(Jan. 1 to present)
22.37%  Dow Jones Ind Avg  
18.06%  Beating the S&P  
15.62%  Dogs of the Dow  
13.38%  Unemotional Value  
13.38%  Beating the Dow  
11.57%  Dow Combo  
 0.87%  Foolish Four