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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 (1728)11/28/1997 10:34:00 PM
From: Chuzzlewit  Read Replies (6) of 6021
 
Terry, nobody is talking about 80% growth going forward. I think that 45 - 50% is attainable in the next year, with growth slackening to about 40% per annum thereafter. On what drives mergers, I again must disagree with you. Unfortunately, managements frequently have their own agendas which differ markedly from those of their shareholders. For example, management may view a merger as good for them, because it strengthens the company as a whole and leads to greater management bonuses by increasing corporate profits. Unfortunately, the deal may be bad for shareholders because it decreases the value of the stock because it leads to decreasing earnings per share.

What ought to drive mergers are synergies, and when a merger is properly structured the shares of both companies will increase in value. As an example of this kind of acquisition look at the merger between QFC and Fred Meyer. The key test is whether the merger enhances shareholder value. This is the only raison d'etre for a merger. If management cannot clearly demonstrate this to the satisfaction of shareholders they have no business running the company on behalf of the shareholders. Larson has so far failed this test.

Regards,

Paul
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