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 : Disk Drive Sector Discussion Forum -- Ignore unavailable to you. Want to Upgrade?

To: Robert Douglas who wrote (8583)	8/21/2000 3:37:18 PM
From: Mark Madden	Read Replies (1) \| Respond to of 9256

Robert - I do not plan to sell all my shares of SEG or VRTS at any one time. However, I plan to sell some SEG once the vote is out because at this point, there is a lower possibility that someone will step forward with a better offer. I think if anyone is looking to give shareholders a better offer they would present the offer about the time of the vote so they would not have to go head to head with SEG's money for very long. VRTS is in a market that has huge growth projected (150%)and they are gaining market share (now about 14%). Also, Software Companies have the potential to increase sales without building new manufacturing plants. I will not be in a hurry to get rid of Veritas but I will probably phase out of it as opportunities arise. I worry that competition could arise from somewhere and cut into the lofty multiples. There are not many software companies that remain on top like Microsoft. Regards, Mark

To: Robert Douglas who wrote (8583)	8/21/2000 4:23:19 PM
From: Sam	Read Replies (1) \| Respond to of 9256

Rob, My guess is it is more complicated that that. a) Many of the "value" oriented holders probably have already sold in the 60s and 70s, especially those for whom holding a stock with a valuation like VRTS's is anethema. I know I have already sold everything that I held in tax deferred accounts, and some of what was held in taxable accounts. b) Many of the buyers of SEG in recent months have been hedging their buys with short sales of VRTS, thus creating what I think will be a fairly large pool of buyers once the deal goes through, or once the discount to the "real" deal is closed sufficiently (whatever the discount is--it will be impossible to tell what the final deal will be until the distribution actually occurs, since the equity holdings are still fluctuating, some of them drastically down, as with ZOOX [so why didn't the brilliant mavens at SEG sell that one when it was above 50?!], and other hopefully going up drastically [like Sandisk]). I think that the cross-currents get pretty complicated, and it is not at all a "sure" thing that VRTS will go down substantially after the deal closes. It may be that covering shorts will cancel out those SEG holders who didn't sell sooner. There may also be potential buyers who are waiting for the deal to close because they believe the same thing you do, and when the stock doesn't go down very much, they will just pile in. A lot--maybe everything--will depend on the Fed, the elections, and the overall market for high PE/high growth new age stocks, especially in the storage sector, many of which, unlike many of the I-nut stocks, have rebounded pretty well. Sam

To: Robert Douglas who wrote (8583)	9/6/2000 12:35:32 AM
From: Sam	Read Replies (1) \| Respond to of 9256

Rob, SSB must have read your post on VRTS/SEG. Here is their spin on it. Of course, it must be read with the thought that they are completely in bed with Silver Lake, Texas Pacific, et al, and are clearly panting to do business with them in the future. The Chinese Wall is, ummm, shall we say a joke? From the Yahoo Veritas thread: SSB sees little impact from SEG Over- hang of shares. iu by: iu85alum (M/PA) 9/5/00 7:40 pm Msg: 13213 of 13219 Salomon Smith Barney ~ September 5, 2000 VERITAS Software (VRTS) VRTS: There Does Not Seem To Be Much Seagate 1H (Buy, High Risk) Overhang For VRTS. Mkt Cap: $48,030.4 mil. September 5, SUMMARY 2000 * The proposed Seagate/Veritas transaction has ignited the perception that 1) Seagate shareholders will dump their COMPUTER Veritas shares upon conversion, and 2) portfolio managers STORAGE will be over weighted in VRTS upon conversion of their SEG H. Clinton shares into VRTS shares and have to adjust their position Vaughan by selling VRTS. Some anticipate that both will put downward pressure on VRTS. * 1-We believe many holders of SEG used it as a backdoor into John C. Dean VRTS. * 2-Following the close of the proposed transaction, we believe any weakness in the stock will be short lived and the overhang is mostly a psychological factor. The overhang looks to be only 1.45x Veritas' average daily trading volume. * We maintain our 1H rating and $200 price target. Since Veritas entered into an agreement to acquire Seagate's portfolio of investments on March 29, 2000 (including 128 million shares of VRTS) and spin the bulk of it back to SEG shareholders, short pressure and speculation surrounding VRTS has mounted. The proposed transaction has ignited the perception that 1) Seagate shareholders will dump their Veritas shares upon conversion which will, in turn, put downward pressure on VRTS, and 2) portfolio managers will be over weighted in VRTS upon conversion of their SEG shares into VRTS shares and have to adjust their positions by selling VRTS to rebalance their portfolios. While we agree that the first concern is real, we are not convinced that there are many holders of SEG that did not invest in it as a backdoor into VRTS. We went to our Equity Derivative Research department for answers to the second and more compelling point... The Skinny From Our Equity Derivative Research Desk --------------------------------------------------- Seagate owns 128,100,000 shares of Veritas. Assuming that 8% of the S&P 500 is owned by indexers, we estimate there will be 10,248,000 shares of VRTS to sell. The current share price of VRTS is $121.75 (on 9/1) so the total dollar value of the shares to sell will be approximately $1.2 billion. The combined average daily volume of VRTS + SEG is about 7.0 million shares, making the shares to sell 1.45 times the average daily volume. Index fund managers can either sell SEG shares prior to the close of the deal or sell VRTS shares at or after the close. We believe the 1.45x daily volume to sell is unlikely to have a major impact on the stock following the expected completion of the transaction, though the psychological effect (and involvement by speculators) occasionally pushes stocks lower for a day or two. Following the close of the proposed transaction, we believe any weakness in the stock will be short lived and the overhang is mostly a psychological factor. Other Facts ----------- While the transaction was originally expected to close in July, it is now anticipated to close late September/early October due to the SEC review process. Arbitrageurs have been shorting Veritas and buying Seagate in order to play the transaction. This has made Veritas one of the top short positions in the market. Following the close of the proposed transaction, the short position in Veritas will indeed drop but it will do so without a closing buy in the open market. Effectively, the arbs bought Veritas stock (or the right to receive Veritas stock) by originally buying Seagate. *The transaction is expected to be about 7% accretive next year or about $0.05 to EPS.