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

To: Gus who wrote (1871)	6/14/2000 11:58:00 AM
From: Sam	Read Replies (2) \| Respond to of 1989

Gus, Thanks for the article. Actually they still don't have it right. The reason the deal is valued at $2 billion is that the new "investors" (as they are charitably called) will retire Seagate's debt of something more than 700 billion dollars; adding that to the actual cash that they put up of about $1.1 billion ($5/share, about 220 million shares) is how they get to $2 billion (nevermind that it isn't really $2 billion). It is no wonder that McNamee and Pope wouldn't discuss this "hellavu deal". The author of the piece also says that "IMG Software and XIOtech--which, valued conservatively, together are worth $750 million." Conservative indeed. For one thing, Mr./Ms. Mintz forgot about the tape drive business. Seagate hasn't broken out revenues for tape drives and software for awhile now, classifying them as "Other revenues", but for the nine months ending in March, they were about $550 million, I believe. Software companies like IMG get PSRs of anywhere between 5 and 17. Cognos, last time I checked, which is one of the leaders, got a PSR of about 7 or 8. If IMG has annual revenues of, say, $150 million, then they alone might fetch a market price of $700-800 million. Add Xiotech, which Seagate bought from $360 million just a few months ago, and the $800 million in cash, as well as the tape drive unit and the fact that current revenues are depressed revenues and Seagate's leadership in the enterprise sector and their 15,000 RPM drives, and you get a better picture of the larceny. I recently saw McNamee on Wall Street Week, smiling as he gave his precious opinions about the market. I almost threw a shoe at the TV screen. No wonder he is smiling. And, if the deal goes threw, he will be, in a few years time as he is selling Seagate back to the public for closer to $20 billion, be called such a wonderful "investor". Right. Remember what Caesar said in Shakespeare's Julius Caeser, "Yon Cassius smiles too much." Sam