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

To: Captain Jack who wrote (90577)	4/4/2001 11:46:32 AM
From: Elwood P. Dowd	Read Replies (3) \| Respond to of 97611

Wednesday April 4, 11:42 am Eastern Time PC makers' cash piles a buffer in tough times By Nicole Volpe NEW YORK, March 30 (Reuters) - The personal computer market might be weak, but PC makers' strong cash positions -- with billions of dollars on their balance sheets -- are what's keeping their stocks from falling all the way through the floor, fund managers said. ADVERTISEMENT When Apple Computer Inc. (NasdaqNM:AAPL - news) warned earlier this year that it would report losses due to slower PC sales, Chief Executive Steve Jobs pointed to what he called Apple's ``Schwarzenegger'' balance sheet -- with $4 billion in cash to weather the storm. Sporting even more muscle than Apple, Dell Computer Inc.'s (NasdaqNM:DELL - news) cash and total investments exceed those of International Business Machines Corp. (NYSE:IBM - news), Compaq Computer Corp. (NYSE:CPQ - news), Gateway Inc. (NYSE:GTW - news) and Hewlett-Packard Co. (NYSE:HWP - news). The big cash piles can help PC makers compete in a price war, carry out a merger, or even go private. And at a time when no one knows how to value technology stocks, cash can provide a baseline. ``Cash is an identifiable asset,'' said Barbara Marcin, portfolio manager of the Gabelli Blue Chip Value Fund with $20 million in assets under management. ``It's the one thing that you know exactly what it's worth.'' Dell, with about $5.4 billion in cash and marketable securities and about $2.4 billion in long-term investments, has $7.9 billion in total cash, according to Bear Stearns. Such big piles of cash have become more important now within the computer-making industry -- a shift away from the intense investor focus on the leaps-and-bounds revenue growth and earnings the companies delivered throughout the 90s. With share prices at depressed levels, cash and debt begin to figure into value investors' calculations of the worth of the one-time high-flyers, as well as the possible winners in any consolidation within the industry. BUYING TECH STOCKS FOR THE REAL ESTATE Cash is one measure that gives a ballpark figure to determine the liquidation value of the company -- which would only be used in the most dire circumstances in which the company could no longer survive. Apple has $4.5 billion in cash and long-term investments, Hewlett-Packard has $4.1 billion, and IBM has $3.7 billion. Compaq and Gateway have $2.6 billion and $1.1 billion, respectively, according to Bear Stearns. Stock valuations can be determined as much by a PC maker's tangible assets -- such as cash and property -- as its growth prospects, fund managers said. ``These tangible assets are the things you could sell on the open market,'' said John Park, equity analyst for Independence Investment Associates -- adding that such tangible assets provide an idea of when to buy a stock on the cheap. Apple, for example, has nearly $12 per share in cash. Timothy Ghriskey, who manages $4 billion as a senior portfolio manager at Dreyfus Corp. said that if you also figure in Apple's ownership of Silicon Valley real estate and other marketable items, Apple is worth $15 to $16 per share. ``That's a pretty good floor for the stock,'' said Ghriskey Apple shares, which closed down $1.35 at $20.24 on Tuesday, have fallen as low as $13.63 in recent months. ``Cash gives investors some security,'' he said. ``A company could do a big repurchase of its own stock, or a company like Apple could even take itself private.'' DELL CAN HOLD ITS BREATH Not that analysts are suggesting that Apple and other vendors of personal computers such as Gateway are unlikely to survive the downturn. Bear Stearns analyst Andrew Neff said that it does mean that the companies with the strongest balance sheets have a staying power that could put pressure on its rivals. Subtracting debt, Dell's net cash and total investments exceeds that of IBM, Compaq, Gateway and Hewlett-Packard combined, he pointed out. ``I'm not trying to imply that anyone is not going to make it,'' he said. ``My argument is that Dell can hold its breath under water longer than the rest of them.'' Dell is already putting pressure on other players in the industry by cutting prices -- which it finds easier than its rivals because it sells directly to buyers rather than through distributors or stores -- allowing it to keep costs down. ``I've seen this talk about a price war, and I don't feel like we're in a price war,'' said Joseph Marengi, senior vice president and group general manager for Dell's relationship group. ``We're just doing what we do.'' Dell and other computer makers have been somewhat reluctant to make large acquisitions. Money to burn could make deals more attractive, Ghriskey said. ``Cash definitely provides a war chest for acquisitions and potentially the acquisitions of competitors,'' he said. And it usually makes a company attractive to buyers as it can be used to pay down the debt of an acquisition and helps justify the price to shareholders. ``However, tech hasn't been great area for mergers,'' he said.