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

To: Jason W. France who wrote (21757)	3/14/1998 4:51:00 PM
From: E.H.F.	Read Replies (1) \| Respond to of 97611

Cry Uncle? Never! :) 1. Mason has publicly stated that he miscalculated demand. Compaq thought that it was going to be much greater than it was. This is a classic example, in my opinion, of supply exceeding demand, which often happens as a result of over exuberant optimism. Excacerbating the problem of their miscalculation were the price cuts from competitors and the collapse of Asia. Since they are going to phase out much of what is in the channel currently, their decision to bite the bullet and get rid of the stuff as quickly as they can through price cuts (their Rocket98 program) is the right move to make, I believe. Remember, my view is that of one who has just bought in recently at a 30+ % discount, so I don't feel the disappointment that other long term holders may be feeling. Mason (I know he's not your favorite character) has stated recently in an interview that their ODM (build to order) model is 100% in place in North America and Europe, and that they expect to have the excess inventory cleared out by June. My whole view of Compaq's big mistake is that they thought demand was just going to keep spiralling upward and upward, never abating. There's only one company in the world that I believe enjoys that relationship to supply and demand, and that also has fanatical customer loyalty, worldwide recognition, and the ability to raise prices regardless of economic conditions, and that is Harley Davidson (HDI), of which I am a stockholder. (Sorry, saw a chance to get in a plug :) ) 2. Compaq has already said that they will keep DEC's services division and that they will support Alpha. The actual restructuring will be made public very soon after the closing of the merger. That's in their best interests in lieu of the reports coming out about IBM trying to capitalize on the uncertainty that exists now. 24% of DEC's total revenues were spent on selling, general, and administrative expenses (first 6 months of fiscal 98). This is where I believe the big cuts are going to be applied. DEC also has 2 billion in cash, cash equivalents, and short term investments,and I don't believe that Intel's payment (result of the suit) is included in that. 3. As to why I don't buy CSCO, DELL, MSFT, etc....you can only buy so many stocks. Compaq is selling at a discount now, penalized by its miscalculation, and so I believe it's a better buy (that's not to say that the other ones aren't good buys either). I believe that Compaq is a good company with good management, excellent marketing skills, and an excellent earnings history, and that makes it a good long term investment in my book.