Compaq Message Board - Msg: 3721168

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Technology Stocks : Compaq

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To: Robert Sherman who wrote (21930)	3/15/1998 11:57:00 PM
From: Greg Jung	Read Replies (2) of 97611

A PE of 22 for a computer company implies a high confidence in continued sales growth and margin levels. At least you can say, whether it is justified or not, the market will again be optimistic about the company and afford it a higher price in whatever time frame you think of selling - barring a worldwide recession. In absolute terms it is still not cheap (view chart extending back more than a couple of years). Relative to Dell it is a no-brainer that CPQ is cheaper. CPQ acquired a lot of stuff from DEC at ultra-cheap price, and the question (concern, I suppose) is if they can manage it into higher profitability without de-constructing its potentials. Anyway, I couldn't say whether the industry as a whole isn't overpriced on a realistic basis - i.e. there may be inevitable turn-downs on the years to come so that 20 years from now we'll still be talking about $30b revenues (inflation adjusted) and a 6% margin. In that case it would still be in a $30 - $60 range and we'd be moaning about not getting a dividend along the way. But in that case I can't believe that Dell will be out there with near trillion dollar revenues its current multiple implies. Greg

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