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Technology Stocks : Compaq
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To: Dulane U. Ponder who wrote (21821)3/14/1998 6:42:00 PM
From: rudedog  Read Replies (2) of 97611
 
One of the areas that this thread seems to have ignored about the tandem and dec mergers is the IP that these companies own. Both Tandem and DEC have large patent portfolios in clustering, cpu design, SMP and MPP algorithms, network technology... Only IBM has a larger portfolio than the combined CPQ/DEC/Tandem. The Intel settlement with DEC was a result of DEC's patents.

Several have observed that the PC space will be more and more commoditized, that has been a main topic of discussion in the industry for many years now. I believe that CPQ has taken the best technology assets in the business (aside from IBM's) at bargain prices. Dell will sooner or later have to make the move out of the commodity space, and now there are no easy ways for dell to develop a strong IP position in the high end that they can execute on. There are a limited number of core patents developed over the last 30 years, and Compaq now has almost all of the ones not owned by IBM.

I would suspect that cpq management knew that making this move was a guaranteed short term hit - but in terms of adding shareholder value over the 3 to 5 year term it was brilliant IMHO. The question is only how long it will take to have the results appear at the bottom line. I have seen estimates like 12 to 18 months and I think that is reasonable given the timelines of cpq's key partners (Intel's merced in late 99 and MSFT NT5 in about the same timeframe for significant penetration). Not that I think the stock will take that long to recover to its october high (6-9 months is my guess).
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