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

To: Salah Mohamed who wrote (78534)	2/19/2000 4:06:00 PM
From: rudedog	Respond to of 97611

Salah - You may have exceeded my depth in some of your questions. I was taking the statement by Capellas that CPQ would be 20% of the commercial desktop business by year-end, and Winkler's comment about the $1B run rate, and equating them, but your analysis is more persuasive - the more likely thing is that ASPs will be somewhere above $500, and that the RATE of sales at the end of the year will be 20% of revenue rather than the total of sales at that point. I took the 4% net figure from the most recent operating results for CPQ's Consumer group as the iPaq is much more like a consumer product in its dynamics and cost structure. I have no idea what the margin numbers will actually be but I doubt they will approach the 6 or 7 percent that DELL had been seeing in their commercial desktop business. My sense is that the whole product was modeled on the consumer model which is after all making money, something the commercial group has had a hard time achieving. As far as iPaq's effect on CPQ's own commercial business, I would predict that it would have the same impact as what I described for DELL, except more so because CPQ will be driving the iPaq... but given the sorry state of the current commercial business I can't see how that is a bad thing. Perhaps Winkler was playing to the crowd... I also agree with your thinking around the VARs - they shouldn't care much...