why microsoft is undervalued as a new media stock and could easily IPO its media assets for more than $100B

Posted on April 19, 2012


With facebook’s valuation at 100 Billion based (predminantly) on its 850Million users (nobody is quoting active users though),  the valuation is roughly $11.7 per user. Microsoft, with over 700 Million consumer eyeballs (yup, between MSN/hotmail/messenger /xbox and skype)  and somewhere around 500 Million registered users it is in most countries a major digital media player with revenues larger than FBs today. so if we took a $10 value per user (being conservative), that would give the media business a valuation of $50 Billion. as MS total market cap is $260Billion – this means that it is probably significatntly undervalued (we havent added in the bing market opportunity in these calcs).

another important aspect is the P/E ratio. google, is trading at 18 – which is good and probably even low based on its current growth rates and strategic positioning. Yahoo is also trading at 18 P/E – and it sucks as a business, so go figure. microsoft is trading at 11 P/E.

zynga’s marketcap is $7Billion at a 1.1B revenue line (no profits), while xbox – bought in $1.6B in revenues and is profitable. in theory, xbox should be at least $ 11Billion (using a price to sales ratio).

Bing is tougher to value, but one would guess that a 20% marketshare should equal at least 10% of googles value (again, conservatively assesing the impact that dominance and scale has in google’s favor). so another $20B for MS

so conservatively, if microsoft had to spin off its media assets into seperate businesses, it could probably rival or be greater than the FB IPO.