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Technology Stocks : Compaq
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To: rudedog who wrote (21788)3/14/1998 1:40:00 PM
From: Jason W. France  Read Replies (1) of 97611
 
ahhh you are obviously a thought leader with crisp thinking. you understand the market and companies very well.

CPQ's current inventory problem has nothing to do with servers. They have between 200,000 and 300,000 Pentium MMX deskpros in the channel that don;t have homes with end-user customers. This fact had alot to do with Intel's Q1 warning. CPQ and others can;t buy the newer PII or deuschettes chips until they very painfully sell thru this older mmx stuff

As far as server mkt you again have very crisp thinking and your estimates on CPQ earnings from servers match up with mine to the tee,

But think about this. IF Servers currently avg around 40-50% margin and they have built their corp financial model on those margins. and that acounts for 60% of their earnings as a whole. Then imagine a world where server margins are suddenly cut in half. OUCH for CPQ and more importnaly OUCH for CPQ shareholders.

AS for dell, I don;t believe they have (though I might be wrong) built their business on 50% margin server business and are a driving force and deflating the margin structure of the server segment (to the benefit of DEll server customers and dell shareholders!!!!!)

In my opinion CPQ (and CPQ earnings) has everything to lose here and Dell and others have everything to gain,

Jason
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