.floatimg-left-hort { float:left; } .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 12px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 12px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 12px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;}
Dear Mr. Berko:

Dear S.G.:

You will continue to lose money if you continue paying those outlandish commissions.

In July, Google Inc. (GOOG-$327) was trading at 44 times earnings, and nothing in the world is worth 44 times earnings, not even Mabel’s Chicken Ranch in Las Vegas. Back then, I didn’t like GOOG because I think the company would suffer enormously if a competitor developed a superior search engine. And I continue to hear stories of several visionary, super-duper search engines that would relegate Google Search to abacus status.

Back then, I didn’t like GOOG because 70 percent of its key staff had become financially independent, and today almost all of those folks are ready to cash in their chips. I didn’t like the company back then because I believed its rapid growth in advertising revenues would soon begin to slake.

I didn’t like GOOG back then because huge, expensive capital investments like Google Earth or YouTube are revenue negative.

I didn’t like Google back then because it was trading at 44 times earnings, which I thought smacked of the excessive hubris that was so prevalent during the dot-com days of the late 1990s. And I didn’t like GOOG because I believed it was guilty of bad judgment when it purchased YouTube.

Today, I don’t like GOOG for all the same reasons. And though the P/E ratio has crashed from 44 to 25, I still don’t like the stock. Its price is still too high.

A possible warning shot across the bow is GOOG’s 2008 fourth-quarter earnings report. Management reported $1.21 per share, missing prior fourth-quarter earnings by 70 percent. Sell GOOG.

Microsoft (MSFT-$15.79) will continue to suck in billions of dollars, because consumers continue to be suckered by the company’s “planned system obsolescence.”

To 85 percent of MFST users, it doesn’t matter a tinker’s damn if they use Windows 95, Windows 96, Windows 97, Windows 98, Windows 99 or Windows 2000. Any operating system higher than Windows 98 is superfluous and overkill.

Though revenues and earnings have increased every year since 1990, this is the first time I’ve seen MSFT trade below $20 a share. Yet analysts on Wall Street treat this company like a whilom lover. And in spite of the fact that very few, if any, long-term investors or mutual funds have made money on this stock, legions of Wall Street chuckleheads with M.B.A.s and Ph.D.s continue to recommend MSFT.

Though revenues have increased nicely, in the past 16 years Microsoft’s operating margins have declined from 58 percent to an expected 39 percent this year. Though earnings have increased almost every year since 1990, net profit margins have fallen from 35 percent to an expected 28 percent in 2009. I can’t find a compelling reason to own this discouraging investment.

MSFT might move back up to the low $20s in the next few months. When it does, get rid of it.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net. © Copley News Service