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Technology Stocks : Seagate Technology - Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Robert Douglas who wrote (1206)	11/18/1999 8:11:00 PM
From: Kevin Linder	Read Replies (1) \| Respond to of 1989

Since we are "brainstorming" possible ways for SEG to get around the tax trap created by the VRTS shares let me propose this and see how everyone reacts -- SEG enters into a merger with VRTS. The reason is simple. VRTS has one asset right now - its high earning P/E ratio. SEG has a lot of cash; a balance sheet with a lot of real assets; and the 60 million VRTS shares. If SEG and VRTS would merge, the VRTS shares owned by SEG would become Treasury shares - still subject to taxation on a secondary offering, but there would be no dilution of earnings from the sale of the shares. The shares could be split up among several brokers and institutions so that one entity did not end up owning a huge chunk of stock in the company. Something important to VRTS management. The tax effect to the shareholders of SEG and VRTS would be nil. The exchange would take place on a tax free basis - no tax would be realized until the shares were sold. I would anticipate SEG/VRTs selling the shares of VRTS currently owned by SEG. This would raise cash of approximately 8.1 Billion dollars. Add this to the cash position of SEG (roughly 1.8 billion), and you have a software company with an extremely large war chest for R&D or Acquisitions. Interest on the net after tax realized amount of the VRTS stock sale would add $360 some million or more to annual earning. Add to that the earnings of VRTS (loks like $50 million a quarter), and the earnings of SEG (lets say a conservative $50 or so million a quarter), and the new entity easily starts making $700+ million a year. The new entity also inherits the high regard for the stock of VRTS; and Luzco and management would likely keep their jobs. The new entity would be a powerhouse in Network Data Storage Area and have the majority of the high end drive market. A perfect position to start positioning products against IBM; EMC; HP. They would also have a war chest for acquisitions and if they could convince the board of DRGN to look at a merger too, they would be a very serious software contender to anyone - IBM or Legato. Just thought I would share this little twist on a way to add shareholder value and get this puppy moving... Kevin Linder