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Technology Stocks : Network Associates (NET)
NET 173.44+0.1%Jan 23 9:30 AM EST
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To: Terry Davis who wrote (1726)11/26/1997 3:52:00 PM
From: Chuzzlewit  Read Replies (3) of 6021
 
Terry, the reason that I think you are incorrect is that the price of MCAF dropped about $10 within a couple of days of the announcement of the merger. At the time of the merger announcement, the stock was selling at about 66 1/2. The initial drop was due to the following factors, in my opinion. First, the dilutive effect of the merger caused the initial drop to about $60. Second, the lowered growth expectations due to the significant NETG component in the combined merger lead to a decrease in the P/E. The rapidity of the drop coming on the heels of the merger announcement really argues rather persuasively that this was the cause of the initial drop.

If that initial drop was due to a general assessment that the market for anti-virus software was saturated I believe that the stock price would have eroded rather slowly, because, to my knowledge, not a single analyst had suddenly revised growth expectations for the industry sector downward.

Regards,

Paul
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