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

To: peacelover who wrote (18589)	2/28/1998 4:48:00 PM
From: Obewon	Respond to of 97611

Some here have expressed concern that the deal will not be accretive this year while others point at CEO comments saying that the deal will be accretive by the end of the year. My $0.02 is that for the entire fiscal year 1998 the deal will be dilutive (depending on how fast CPQ can sell off unneeded asset/ redundant businesses). Having seen the Tandem merger, I expect that CPQ will take a rather large charge for the second quarter (over $1B) to account for costs of the merger and subsequent reorganization (read big layoffs). Third quarter is a toss up and I couldn't begin to accurately predict whether CPQ can boost DEC's profitability enough considering the organizational changes which will still be ongoing. However, by 4Q98 the combined entity will have earnings greater than those of both CPQ and DEC combined from 4Q97. I believe this is what CEO meant when he said that the deal would be accretive by the end of 1998. To support this I direct you to research DEC's earnings trend (which are remarkably like Tandem's prior to its being mergered with CPQ). DEC's last reorganization had finally restored profitabilty to the company - profits which would have increased in the current quarter had CPQ not announced the acquisition. Again I won't hazard to guess how DEC's customers will react THIS quarter since the announcement injects long term confidence but short-term uncertainty until the deal is complete. OB