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Technology Stocks : 3Com Corporation (COMS)
COMS 0.001300.0%Nov 7 11:47 AM EST
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To: sunfish who wrote (41417)3/6/2000 3:51:00 PM
From: djpfive  Read Replies (1) of 45548
 
Look at LU, they are going to divest their slower growing businesses and their stock shoots up. Same thing here, COMS, though perhaps a good company in its own right, is a millstone around the neck of PALM because COMS + PALM cannot achieve the same high rate of growth. If PALM isn't distributed, the interest in COMS (with PALM inside) will be much less than the interest in PALM alone. Hence PALM can command a much higher P/E as a standalone and the sum of the parts IS greater than the whole in this case.

Are you saying that this is what you think makes sense, or that this is what the market thinks?

The analogy to LU is a good one. In both cases, it's irrational pricing. It's not as if LU's slow-growing businesses were the ones that failed to meet demand, resulting in their earnings shortfall.

Sure, PALM or LU without their slower counterparts should have higher P/E's. But the total E will be lower.
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