Hi Eric ... About the Service Business
>>IMO the current Service Business model is not working and may
require a significant restructuring and .....Rosen may see this too.
I believe Ray Lane has built a more effective service model at
Oracle.<<
I wouldn't go as far as saying the Service Business model is not
working, maybe it isn't working as it should be. Ray Lane would be a
great choice to become the CEO of CPQ. My best guess is that he will
be. Did you observe that the new acting COO was a former ORCL
executive?. Hmmm, maybe there is something cooking here with Ray Lane.
Here are some statistics about the Service Business:
6/15/99 - 1999 VARBUSINESS 500 REPORTS ENORMOUS
GROWTH AMONG INFORMATION-TECHNOLOGY RESELLERS IBM
GLOBAL SERVICES RETAINS NO. 1 Position
MANHASSET, N.Y., Jun 15, 1999 /PRNewswire via COMTEX/
tscn.com
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About Storage Business
Here is another interesting article about CPQ storage business:
Monday June 14 8:26 AM ET
Compaq Offers New Storage Strategy
From the article:
Revenues associated with Windows NT storage are expected to grow from $6.2 billion in 1998 to $25.7 billion in 2003, according to an analysis by Dataquest Inc.
Compaq currently holds about half of that market.
Compaq's $3.1 billion in NT storage revenues last year accounted for
about 10 percent of revenues for the entire company, best known for
being the world's largest personal computer maker.
dailynews.yahoo.com
My Comment: It seems to me that the storage business alone accounts
for the total market capitalization of CPQ. From the above, it is
expected that this storage business grows at about 33% annually. This
CPQ storage business is similar to EMC business (EMC revenues in 98
were 4B with annual growth of 30%-35%). Considering that the market
capitalization of EMC is about 50B, CPQ storage business should be
worth about 38B (50Bx3.1B/4.0). The current market capitalization of
CPQ at the current stock price is about 37B ($21 3/16 x 1.75B). It
seems that the valuation of CPQ stock is becoming irrational.
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On another note, I listened to the CNBC report about CPQ which
Victor referred to in a couple of posts, and I confirm that Rene San
Miguel (the reporter) stated very clearly that Mike Larson (Sr. VP)
denied that CPQ has inventory problems. Take it for what it is, but I
believe it as I explained in a previous post.
Regards
Salah
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