Denise, I think you may be comparing apples, oranges, and a third fruit to be named later <VBG> when you talk about CPQ, IOM and WDC. For what it's worth, here are my thoughts on the issue.
Of the three, IOM is the only one that I think truly qualifies as a tech stock whose problems are technological in nature. Competition from other companies limited what was was originally felt to be a company with an unlimited future. Thus, flagging sales are more important in this kind of company because they represent a business-specific problem that probably will not go away with time. The WDC fiasco was the result of over-exuberance on the part of the dd manufacturers. Excess capacity hit one company after another, but this has been the history of this group. They have never figured out how to limit the growth of plants. It mattered little whether you invested in WDC or SEG or QNTM -- they all suffered the same fate for the same reason. CPQ is different from the the preceding two cases. Here we have (IMO) the result of a self-inflicted problem that will take a few quarters to work out, but in the mean time will probably hurt its competitors using distribution channels. Some bears believe that Compaq's problems are systemic, industry-wide problems like the dd's, but I believe that they are relatively isolated, and will be worked out sooner rather than later. In any event, I don't believe they are caused by plant over-capacity.
To my way of thinking, you need to be able to answer the sell/hold question in terms of the news. Does the news portend a long-term compromise in the underlying growth story of the stock? If so, I would sell. If not, I would hold. So, for example, if earnings are down as a result of weak sales to Asia, I would probably be tempted to hold because that weakness is probably already factored into the price of the stock. On the other hand, if lowered earning are the result of a loss of technological edge I would exit the stock very rapidly.
TTFN,
CTC |
