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Non-Tech : General Electric (GE)

GE 296.64

+1.1%

3:59 PM EST

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To: Captain Jack who wrote (1501)	10/22/2000 7:39:57 PM
From: Michael & B.Anne	Read Replies (1) of 3256

Why the concern, this is wonderful !! (IMO .. we will see) GE will open much higher tomorrow ... I would not be surprised to see up 5 points on the open. I mean, who is gonna put in a sell order. 1) HON closed on Friday at around $41 per share with a resulting P/E of a little over 19 times multiple. GE bought HON at very near a cost of 1 share of GE for each share of HON – so with the deal closed we can safely say the price of single HON share should have been $52.125 at close Friday. At $52 Plus, the new p/e for HON (by itself now moves up to around 25 times earnings). But now it is part of GE, and a share of GE is valued at over 42.5 times earnings – Friday close. 2) or lets put it another way, GE has added around 8% to its float (number of outstanding shares) and added 13% to its outstanding earnings. Put even more simply, GE (by adding shares) decreased the percent of earnings each share gets by around 8% while at the same time (by adding HON earnings) increasing the amount paid to each share by 13%. So for each share the new anticipate 2001 earnings number goes from $1.47 to $1.54. 3) The only way this increase could hurt would be for the market to say the acquisition of GE bodes poorly for future growth –the inclusion of the Honeywell product into GE will act as a drag on earnings – which in turn would effect the market multiple. But (IMO) that will not happen ... quite the opposite (GE's better management and more steam lined (reduced costs) operations will increase the margin earned on the new HON products – not to mention that oft time ill used word “synergies”. 4) Finally, the icing on the cake .. any worry about the succession problem is no longer of immediate concern. Quite the opposite. All in all, this is a great condition

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