Try this on for size;
DEC is tied at the hip with cpq. DEC's gains or losses during this interim period are relatively insignificant. Furthermore, neither positive nor negative news will likely move the stock since it is cpq's stock price which is now the pied piper. All eyes are on cpq - not dec. In other words, the question becomes should cpq's stock price go up because dec has good earnings? The answer is no. In fact it cannot during this interim period filled with uncertainty relative to the merger. Because cpq's stock price cannot, will not and logically should not be impacted by dec at this point, then likewise dec's stock cannot move since it is tied to cpq's. The moment there is any disparity between the two stock prices (vis-a-vis the merger formula) the arbitragers move in, take profits and eliminate the spread.
As to your second point, if cpq simply didn't manufacture to the extent of excess inventory the losses would've been phenomenal for the first quarter. But since they wanted to keep cpq at break-even they spread it out over two quarters (hopefully that will be enough) and mitigate the losses with other gains and end up break-even for two quarters. Better break-even for two quarters than a monumental loss for one quarter and then profits in the second quarter (or so goes the logic). The other point you have to remember is one of manufacturing logistics. They have commitments with suppliers, etc. They simply cannot turn off the tap. Suppliers could get killed; some of whom might end up out of business. You can rest assured that many suppliers have been crying the blues and screaming and yelling for more business. Also, along the lines of manufacturing, cpq will try to utilize capacity. Can't simply shut plants down for extended periods of time (a week or two is fine, beyond that an entire host of new problems develop, such as labor problems, labor inefficiences, operating inefficiencies, etc.); |
