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Technology Stocks : Gateway (GTW)
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To: Brian Lempel who wrote (82)9/30/1996 9:44:00 PM
From: Fred Fahmy   of 8002
 
Brian,

Good to hear from you over on the IOMG forum. I do not currently have a position in GATE. I was in at 18 and out at 26. I was back in at 28 and out at 37. I should never have sold and I would love to see a correction back to the low 40's or high 30's. GATE is clearly undervalued compared to DELL (based on earnings). At a P/E of 20 and est 1996 earnings of $3.00 EPS the stock is worth around $60. One concern, however, for all PC vendors is the price of DRAM. Plunging DRAM prices have allowed PC manufacturers to continue their agressive price decreases without hurting (actually slightly improving) their margins. If memory prices remain firm and continue to increase for a long duration, it will put pressure on all PC companies. Fortunately, the big direct boys (GATE, DELL, and MUEI) can probably deal with these pressures better than the traditional players because the direct players have less overhead and less inventory. I hope to own GATE again. A very well managed company with great potential.

Take care,

FF
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