Software looks like a really great business again. Buying software stocks, an even better one. A mere 13% boost in sales industrywide over the last year provided enough inspiration for Wall Street to mark up the share prices by 86%. The sector is now trading at a rich 4.4 times sales, against the 1.5 average for the stock market as a whole. The fat multiple seems justified. Isn't this a high-margin business? Once you've written a $500 program, you can make copies for a buck. Watch out. Those high margins are withering away. Software vendors are turning into service companies. They are migrating from the lucrative business of selling software licenses into the much less lucrative business of supplying programmers and consultants to business customers.
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