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

To: PCSS who wrote (95535)	2/28/2002 9:12:26 AM
From: Elwood P. Dowd	Respond to of 97611

Merrill's Milunovich on HP by: skeptically 02/28/02 09:08 am Msg: 274727 of 274728 Hewlett-Packard Co (HWP; $20.03; C-2-2-7) You Are What You Eat (Comment Available) Volatility Risk: Above Average 02E $1.10; 03E $1.35; Market Cap.: $38,839mn • HP put on the full-court press at its analyst meeting to convince investors to vote for the merger with Compaq. We didn’t require convincing since we’re in favor of the deal. Carly Fiorina was persuasive enough that we’re concerned about the difficult situation that could ensue if the merger doesn’t occur. It looks like 50/50. • We agree with HP’s calculation that savings could exceed $2.5 billion with revenue loss limited to 5%, resulting in 12% earnings accretion to about $1.50 in F2003. • New was the company’s estimate of a restructuring charge exceeding $1 billion with about $1 billion of cash use. • We think HP’s computer business really needs Compaq’s help in Intel servers, storage, and commercial PCs. We didn’t buy the pitch on synergies between imaging and computing. • The stock looks inexpensive if HPQ can achieve earnings of $1.50, but we’re getting more worried about how long it might take to unlock value if the deal fails. Carly Fiorina seems resolute about not spinning out printers. (S. Milunovich/S. Cross/L. Tankel) Techonomics Technology Durable Goods Report (Comment Available) • Our Techonomics reports review government data of importance to technology. The January Commerce Dept. statistics were reported. • The aggregate statistics improved significantly with tech orders at –15% year over year compared with – 27% in December and shipments at –22% versus – 28%. The book-to-bill was flat at 0.98 while the inventory-to-shipment ratio of 1.41 was the lowest in almost a year. • Most of the improvement came from Semiconductors, where orders rose 49% year over year. This apparent anomaly occurred because January did not see the customary sequential order decline, making for an easy comparison with last year. We’ll watch the SIA data as a check. • Still, there was real improvement. Computer order and shipment declines moderated and Comm Equipment shipments improved. • The turn in tech has begun, which usually is good for the stocks. Although we wouldn’t be too underweight, our concerns about the rate of recovery and valuation make us less optimistic than we would normally be given the change in second derivative. (S. Milunovich/M. Ramirez)

To: PCSS who wrote (95535)	2/28/2002 9:24:40 AM
From: Elwood P. Dowd	Respond to of 97611

MARKET TALK: Uphill Battle To Get H-P Deal Done 02/28 8:48 AM (DJ) Story 4035 (CPQ, HWP) Edited by Thomas Granahan Of DOW JONES NEWSWIRES (Call Us: 201 938 -5299; All Times Eastern) MARKET TALK can be found using code N/DJMT 8:47 (Dow Jones) Banc of America analyst Joel Wagonfeld says that while he thinks the merger of Hewlett-Packard (HWP) and Compaq Computer (CPQ) is viable long-term, he doesn't think it will get shareholder approval. According to the analyst, 66% of remaining institutional shareholders must vote yes. "We see this as a very high hurdle," he says. Although Wagonfeld said H-P did a good job of recapping the rational for the merger Wednesday at its final analyst meeting before the vote, he had hoped to here more specifics about near-term implications and linkages between business segments. (DLF)