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

To: David R. Schaller who wrote (77164)	1/31/2000 8:25:00 AM
From: rupert1	Read Replies (2) \| Respond to of 97611

David: It's not clear to me that the holdings that COMPAQ own pay any dividend let alone 5% a year. If you meant 5% capital growth per annum, you would still have to deal with the problem of liquidity. The $8.3 billion is not "money", that's the market value of securities. They can go up or down in value. Meanwhile, about 2/3rds of it, at least, is locked-up. They cannot turn it into money yet because of restrictions on sale they entered into when they sold Alta Vista. The CMGI IPO of AV will almost certainly impose more restrictions on COMPAQ's ability to sell the 18% of AV it continues to hold. Assuming that the portfolio continues to hold its values - even when and if COMPAQ gives the SEC notice of its intention to sell - the sum total of the holdings may be $5-7 per share. It is hard to believe that if COMPAQ still owned Alta Vista, or if they could now convert these passive investments to working capital, the value would be much more than that for shareholders. Working capital producing net profit would be recognised as "legitimate" by Wall Street and would be reflected in the earnings expectations and would therefore increase the share prcie. Instead of waiting for lock-up expiries, they could leverage the value of the holdings to shareholders in a number of ways, by giving shareholders of record equity ownership of the holdings. This would also stimulate market interest in COMPAQ's shares. But it looks like they intend to use the holdings as a kind of slush fund to guarantee they meet and exceed expected earnings each quarter. It is one way of monetizing holdings and increasing cash and better than just sitting there on a pile of securities. Unless, of course, you are a long, long, LONG and hope to benefit from these securities at some distant date in the future.