interview in todays Barrons on compaq.excerpt.
Q: What do you think of tech stocks here?
A: The strong balance sheets are going to try and get rid of the weak balance
sheets. The most recognizable example of this is Dell. Dell is going to spend
the next three to four years making life as miserable as it possibly can for
Gateway, Compaq Computer and Hewlett-Packard. That's why the
Compaq-Hewlett-Packard deal is a really terrible idea. The last thing they
should want is to buy Compaq. The first thing they should do is get rid of the
PC business because they are not competitive with Dell. That's the reality.
Q: Ah, but Compaq is telling us they're a server company now.
A: Okay, now they are competing with Sun Microsystems, IBM and Hitachi.
There are companies out there with really solid balance sheets that can
underprice them, period. And they will. End of story. It's also important to
remember that when tech companies talk about increasing order rates, those
orders are often buying top-line growth and no bottom line, particularly if the
company is operating at less than 50% of capacity utilization and its
competitors are, too. Name the product: telecom equipment, PCs, cell
phones, semiconductors or whatever, and you'll see there are huge price
pressures. To get capacity utilization up, companies will buy business. So
order rates may go up, but earnings won't. |
