In a post in GigaOM last night, Kevin Kelleher* tries to create some news story that revolves around how positive the $35.50 per stock is for Microsoft, which shows a basic misunderstanding of stocks or the value of any "product". (Disclaimer: I'm not an expert either!)
Here is the gem that he wrote:
"... Microsoft had a $300 billion market cap at the end of Thursday, before its earnings report, about 150 percent of Google’s (GOOG) and roughly double that of Apple’s (AAPL) on the same day. That’s a lot of market cap, and to get it to rise 11 percent means pumping in $33 billion dollars.
Can you spot the issue? Yes, it's the bold red text and the title of this post.
Here is his math: Market cap of Microsoft was $300 billion yesterday, today is about $333 billion, so $333 B - $300 B = $33 billion dollars. Genius!
Yes, it's true, Microsoft Market Cap grew by $33 billion dollars, but it absolutely doesn't mean that "$33 billion" dollars were invested ("pumped") on Microsoft.
The two basic mistakes is that he assumes that all stocks were traded that day, or that the initial price of the stock was zero. Both are incorrect.
Roughly, the right math goes like this: 217 million stocks were traded today, bringing the stock from $32 to $36, which really means pumping $868 million dollars into the stock!
I'm glad I don't take investment advice from bloggers (like myself).
Now, to the important story: Wow! Microsoft did kick some ass this quarter and I'm happy to all my friends that are still working there, including my wife.
* Who the heck is Kevin Kelleher? GigaOm doesn't list him as an editor, contributor or anything.