Dow Jones 10129.83 +35.77 11:44 am PST, July 20, 2004  NASDAQ 1907.20 +23.37 For info, visit access.smallcapnetwork.com S & P 500 1106.66 +5.76 To be removed, please click here Russell 2000 561.12 +6.39 VOLUME 04: ISSUE 55  Feature: The 3 M's. Martha, Microsoft, Markets. Martha (NYSE: MSO) should just do her time. All this theater regarding appeals and false bravado will do little more than damage the company she apparently holds so dear. My understanding is that under Federal Law, if she went in August 1st and kept her proverbial nose clean, she'd likely be home for Christmas. And if she wants to clear her name, she can do it that after.  In our March 9th Martha piece, we suggested that the then $8-$9 level was likely the bottom. Now, as the shares burble around $11, the question arises where do they go now? Technically, the shares would have to break $13.70 to herald a new up-leg. The downside seems to be in that previously noted $8-$9 area. We also noted then that a prudent put purchase for insurance purposes might be advisable. Might be wise again, for new purchases. As we speak, any one who hasn't heard of Martha--we don't even have to use her last name anymore--has likely been in a cloistered monastery for the last several years. And, although the company has been pounded both in influence and revenues, I believe that the sun will rise again, at least for those investors who can take the ongoing heat.  Here are the stats. The company has cash on hand of $166 million (as at March 31/04). No debt. Revenues projections for fiscal 2004 are $192 million, off from $245 million in fiscal 2003. The company is also projected to lose nearly $1 a share for 2004. In 2005 there seems to be a renaissance. Revenues are forecasted at $210 million and earnings, while paltry at 3 cents a shares looks interesting when you consider that the company lost 4 cents in fiscal 2003. Interestingly, the very few analysts--WallStreet has all but abandoned coverage--who post numbers for the company classify MSO as a screaming sell. Can you say contrary indicator? Lest we forget, this is the same Wall Street that has had Intel (NASDAQ: INTC) as a screaming buy all through the nasty semiconductor decline. INTC shares are off almost 25 percent since February. But then, as we noted on February 25th, we've always disliked Intel. Martha's brand is solid, if slightly tarnished. The reality is that she didn't hurt anyone but herself. Michael Moore isn't planning a tell-all documentary. The faithful will continue buying and new customers will just have to stop and take a look at the goods. Advertisers will return in the fullness of time. And Martha will eventually look out at us from behind her snappy kitchen counter once again. Conclusion? MSO will see the light likely over the next 12-24 months. Or maybe sooner if she'd just shut up and do her time. Mr. Softee. Ah, Microsoft (NASDAQ: MSFT). Ironically, while it represents the poster stock that is politically correct to dislike, it has over the last three years been delivering success that is virtually impossible to argue with. Can it grow bigger? Of course it can. With a current market cap of $300 billion, I sincerely believe that over the next 10-20 years, this may well be the first trillion-dollar market cap company. At $28 dollars, the shares are at pre- 2000 price levels and half their high of $60 during the heady days of the bubble. We like MSFT. We alerted readers to the shares on March 25th at $24.90. Even though the shares have moved up 12 percent since then, we think readers should own at least a small core position for the long term. The shares have been stuck in a range of between $24-$28. MSFT had a nice run starting in mid-May, which ended in early July. We feel that the shares have since pulled back nicely and appear to be creating higher lows after a bit of consolidation. We like the upside here and if it can break above $30 it has a lot of room to run--a very nice longer term hold with limited downside. On the horizon, MSFT's $60 billion of cash--which represents about $5 a share and no debt either, by the way--has fixated investors and analysts. Rumors of a decent dividend increase, maybe a special payment, and a host of other potentials abound. The bottom line is that it won't do anything stupid with the money and will undoubtedly use at least a significant portion for the benefit of shareholders.  More stats. Projected revenues and earnings for fiscal 2005 are $37 billion and $1.34 a share respectively. (In fiscal 2003, those comparable numbers were $32 billion and 93 cents per share). At $28, the shares throw off a very compelling projected price earnings ratio of 21 times. Although growth is projected at 10 percent for next year versus 14 for 2004, I suspect it will be higher for 2005. Look for the shares to break $30. That should portend decent growth and a further price rise to--at the very least--a higher trading range. The whole Nasd'y market. I'd be thrilled to report that our assessment on May 21st has changed. It hasn't. Therefore, I'll be mercifully brief. The Comp has been stuck in a range between 1850 and 2000 for what seems an eternity. Patience is the best weapon at the moment. Our feeling then that the NASDAQ would touch 2000 and pullback came to pass. Currently, we'd like to see this consolidation continue at least and build a stronger base. The critical support level is 1850-1860. If that level is breached, we could move, short term, into the 1700 range. It's hard to know what's worse; a volatile market or a range bound market. No matter. Raising some cash would be good and selective buying of favored names --especially some in our universe--makes sense as we wait for resolution, hopefully to the upside. No doubt, this is a tough market, especially for smallcaps. We've been here before, as you have.  It won't last forever and we believe that in the not too distant future, today's prices--which could go lower first--will look cheap.  Equities are virtually the only commodity consumers eschew when they're cheap or at least on significant sale.  I've never understood that.     We Value Your Feedback Got comments, questions or suggestions? Send 'em on over: Editor@smallcapnetwork.com If you wish to send a written request or inquiry, please send it to our physical address: TGR Group, LLC 3525 Del Mar Heights Rd #334 San Diego, CA 92130 Unsubscribe Here D I S C L A I M E R : The SmallCap Digest is an independent electronic publication committed to providing our readers with factual information on selected  publicly traded companies. SmallCap Digest is not a registered investment advisor or broker-dealer. 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