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

To: Elwood P. Dowd who wrote (84659)	9/9/2000 11:11:40 AM
From: John Koligman	Read Replies (2) \| Respond to of 97611

Compaq got some press in this week's Barron's, their lead article is a tech roundtable with Roger McNamee, Walter Price, and Kevin Landis. Price likes Compaq but slams Dell a bit... Regards, John PS - On the other hand, Price makes a statement that 'he thinks a former DEC guy is running the company'. I hope he doesn't mean the CEO, since that would be an indication of the level of research here <gggg>. Another stock we own that hasn't gotten a lot of respect is Compaq Computer. If you look at building out these exchanges, you know, to do a trillion dollars worth of commerce, you are going to have to have quite an infrastructure and that's not just going to be optics and communication switches. I think you are going to have to put a lot of computers in. When I go out and talk to the software companies, they keep telling me: "Well, NT servers are gaining a share of our customer base." It is in the valuation of a Sun, which is certainly doing well and is well-recognized and has growth. But in the case of NT servers, somebody like Compaq is getting no respect. Q: Why do you think that is? Price: Compaq traditionally hasn't executed very well. They have kind of had this transition from a dealer-based model to a more direct-based model that they've been going through. And that has caused them to lose lots of money in their desktop business. It looks like they have that under control. And the server side of Compaq has always been a good business and is about to get a nice spurt of growth. The company's position is still solid. Landis: That's my understanding, too. They have a close tie with Oracle, with their service business. So if that really plays out, it should drive Compaq's server business. Price: They are the No. 1 NT server company. And I think the guy who is running the company came out of Digital Equipment. He understands the server business. He understands what customers want. And that's the driver. Q: Personal computer companies used to be synonymous with technology stocks. Now, they no longer get the ink. Are they unfairly forgotten? Landis: My view is that they are just fundamentally less exciting than so many of the other trends going on in high tech. You know, the people who jumped on the Internet bandwagon earlier, who looked the smartest soonest, had to take money from somewhere. And a lot of them took it out of their PC stocks and got off that old trend. And I think they have to be prepared to do that on any investment theme. The PC business now has lots of revenue. But there is a lot not to love about it, and we have never owned a PC stock. Price: Kevin's right in the sense that the Internet is the driving force of technology, not the PC. And changing out your PC is not as high a priority as changing out your Internet connection for most consumers, for example. That trend has to play out before attention returns to the personal computer as more of a multipurpose product, such as for storing and playing music. But first you have to get the infrastructure into place for the Internet. Q: What about Dell? It was such a darling of many for years. Will it be again? Landis: I always thought Dell was a PC company, but according to their commercials they are an E company and Dell owns E. So every time I see that commercial, I think that Dell knows that the PC business isn't the one it wants to be in. They did well, really well by taking market share and executing well and having the better plan. And, basically, beating up their competitors. But that doesn't change the fact that the PC business just isn't that great of a business to be in these days. I mean, let's go back to the point about Compaq. You know, you could argue that the smartest thing Sun ever did was to not come out with a PC product. Compaq, if it were just a server company, would get a much better valuation. I think people are speaking with one voice here: They don't like the PC business. And they are right. Q: Thanks, Kevin. And thanks to you all.