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Technology Stocks : Compaq
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To: rudedog who wrote (72960)12/1/1999 2:48:00 PM
From: rupert1  Read Replies (1) of 97611
 
rudedog: The analogy with MSFT or IBM or INTC is a tad bit pretentious. I know that COMPAQ would like to be thought of in that company - that seemed to be EP's main motivation. But the fact is those companies cannot only afford to be modest; they are obliged to be modest by the dynamics of the situation. They have achieved very rich valuations in the market. And with their rich valuations comes increased risk of litigation if the valuations were to shrink. So the restraint they show in discouraging even richer valuations and discouraging speculative bubbles and volatility in the share price is a direct result of and a symptom of their success.

COMPAQ does not have comparable success. By most conventional measures - apart from its p/e - it is selling at a substantial discount to the market. If it were true that it shows restraint in blowing its own trumpet because it is aping MSFT and IBM and INTC then it is living in a fools paradise. The real reason COMPAQ has not been able to blow its own trumpet this last year is that its return on investment, its earnings, and its immediate prospects have been so poor. Last year, when EP did a bit of trumpet blowing, he was wrong not because he was fanning the flames of overvaluation but because he was presenting a false picture. COMPAQ's efficiency, earnings and immediate prospects were not what he said they were.
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