Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Salah Mohamed who wrote (77536)	2/6/2000 8:12:00 AM
From: rupert1	Read Replies (3) \| Respond to of 97611

Salah: Now, I don't understand your argument. CPQ realized more than three times your estimated $2B. It's not true that COMPAQ raised the amounts you gave. I can't recall the market value of the CMGI shares but they were susbtantially less than that. COMPAQ did not know that the CMGI share price would rise as they have since CMGI got AV. (Even Capellas describes the current worth of the CMGI holdings as "poetic license"). Nor did most of those who defend the deal. If they think it was such a clever deal, why did they not sell their COMPAQ shares and buy CMGI? In fact, it could be argued that the CMGI did so well after it acquired AV partly because it acquired Alta Vista just as COMPAQ did so badly partly because it divested AV. I see much interest today in CMGI because of the forthcoming AV IPO - and the value they receive from it when they spin it off will give a better indication of its true worth and what COMPAQ lost in the deal. I think it's true that you don't understand my argument. In the first place, I said in excess of $2 billion from a COMPAQ IPO of AV. The IPO market was hot in the Fall, 1999: there was enormous market interest throughout 1999 in the forthcoming COMPAQ IPO of AV. Many stated they bought COMPAQ in anticipation of the IPO. Whatever amount would have been raised by the initial offering, the price of AV would have risen in the after-market, probably as fast or faster than the CMGI shares have risen. In addition it would have been a vehicle for COMPAQ to make acquisitions and make alliances cheaply using AV inflated share capital. There is also the wealth it would have created by stimulating interest in COMPAQ shares, and adding value to COMPAQ's other internet related offerings. I have also explained fully the strategic and corporate cultural benefits it would have had for COMPAQ and the competitive advantages it would have given it. In addition to the tremendous amount of money they got from this deal, the strategic alliance with CMGI opens several doors for them to be involved in the internet. I think this is pap. This is the COMPAQ PR line when they try to explain why they sold the family silver. There is not a single deal with CMGI that they could not have made if they had kept AV. I would argue that with AV COMPAQ could have made many more and better alliances. In all your discussions of AV you never seem to address the main topics at the time they made the CMGI deal. At that time.....clearly, the CMGI deal helped the company to survive and gave them the financial strength to be able to straighten out their problems. You must be reading the wrong balance sheet. At the time of the deal, COMPAQ had no debt, about $3 billion in cash, had annualised revenues in excess of $35 billion - and you say it needed to sell AV for CMGI shares to survive! AV was costing it peanuts, and if it had been floated in the Fall would have cost nothing. In the unlikely event that COMPAQ needed to raise cash, it could then have sold off chunks of a post-IPO AV at an inflated price.