Jim, during real bear markets you get a double whamo, earning reductions due to economic conditions and P/E compression. Frankly, in "old" traditional bear markets, stock's floor have been around 80% of book and sometimes lower, so when I say 2/3 times book, I am already taking into account that both companies are typically stellar competitors. NTAP has grown more rapidly in recent years than EMC, but that was for two reasons, EMC was much bigger, and NTAP operated in a "virgin market" (smaller storage systems rather then the giant systems EMC and IBM were competing against each other for). Since the acquisition of Data General by EMC, they are now targeting NTAP turf, and EMC is not a slouch, with more than $3 B in their coffers, they can afford to compete aggressively and they will, that will slow down the torrid growth if NTAP, IMTO, and thus bring their respective PE more in line with each other. Actually, the situation should be compared to INTC and AMD, and INTC was often "awarded" a greater PE than AMD in recognition of its leadership position, the same with differential PE's between AMAT and NVLS and KLAC on the other side. Aggressive well managed leaders with full coffers should be awarded greater PE than their smaller siblings, IMTO.
Thanks for the kind words, what happened, we had a stalking visitor? (g).
Zeev |
