Compaq Message Board - Msg: 3307703

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Technology Stocks : Compaq

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To: gc who wrote (15723)	1/30/1998 10:45:00 PM
From: gc	Read Replies (2) of 97611

I have an interesting question. Anyone care to comment? DEC just reported eps of $.44 per share. Next Q is expected to report $.51 per share. CPQ just reported $.42 per shares and is expected to report $.37 per share next Q. In this merger, each DEC share is exchanged for 0.945 CPQ share. How could dilution take place in this case? Could be my math skill rusty? There is certainly some merger charges be needed. But it is usually treated as a one-time charge and excluded in eps valuation. Besides, CPQ pays $4.5 B to DEC. In return, CPQ get $1.3 B on DEC's balance sheet plus $700 m from Alpha sale to Intel and $400 m from Cabletron, plus $3B tax loss carry forward benefit. (total cash benefit valued at $6.4 B for $4.5B cash payout) The deal is pretty good, why is Street treating it so badly?

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