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Technology Stocks : Compaq
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To: Kenya AA who wrote (37134)11/21/1998 4:01:00 PM
From: rupert1  Read Replies (2) of 97611
 
KenyaAA: Thanks. Computer Associates CEO (Sanjay) also stated in October, 1998 that because of the effects of the Asia downturn on some of their customers and because of YK2 expenditures, there would be a slowing of expenditures for their products. Charles Wang then expounded on that statement. He suggested that these factors would reduce their revenues by about 7%. The stock nose-dived from $61 to $30 as a result. Subsequently, other companies have made similar statements or have attributed actual revenue slowdown to the same factors. (I notice SAP is troubled by this phenomenon).

The point is that if these apprehensions have been exaggerated there are good bargains in the shares of companies where there has been an overreaction or where there is too great a provision for a slowdown.

On the other hand if IT expenditures are to be as low as Morgan Stanley suggest perhaps some tech high-flyers are in a bubble right now. I don't think this applies to CPQ, because its p/e is relatively conservative, but CPQ could be affected by any general correction of overvalue in the tech sector. I would like to believe EP's cheery forecast, but normal skepticism is overladen in his case with the memory of Mason's over-optimistic statements earlier this year.


Victor
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