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

To: Jason W. France who wrote (21786)	3/14/1998 2:53:00 PM
From: Gregg Glogowski	Read Replies (2) \| Respond to of 97611

Jason W. France - perhaps you should take a few deep breaths. Your message appears to be quite confused. I gather that you sold your CPQ stock when they bought TDM. I gather that you considered CPQ as an assembler of PC's in the same league as Dell, Gateway, PB, etc. You believe that the TDM merger has failed, and the DEC merger will court disaster. You believe that CPQ has forgotten how to run a screwdriver, and worse, how to forecast. I had the opportunity to talk to some TDM folks this week and they tell a different story. They see CPQ as an opportunity to reach a far larger audience with their secure transaction products, etc. They see DEC as opening up a much larger window of opportunity. They see Dell as being excellent managers of capital but not technically innovative. Dell is seen as a great retailer for Intel. That's great as far as it goes. Moving up the food chain where folks use computers for more than power typing, it might not be enough. Likewise the guy on WSW last night tells of buying in, and selling out of CPQ several times over the last three years. Each time he caught the wave. Sounds like a hero, right? Sounds like a market timer to me. Note that the past two years he has underperformed the market. He runs a 'value' fund but espouses using momentum methods with CPQ. My point is that CPQ appears to be moving away from being a screwdriver shop. They are attempting to keep their assembling business, and add a solutions business. So I don't know what sort of multiple to assign their stock. I do know that using blind timing methods predicated on the screwdriver business doesn't seem logical. Perhaps they should take your de facto advice - shed TDM and stiff DEC. Do you really think that they should out-Dell Dell? It seems to me that they are determined to achieve the Dell efficiencies with a distributed information system, while adding value by having access to non-Intel technology. Further, by reaching up to the highest level of computing, they keep a high margin business that spins dividends down to the PC. In sum, mergers are very difficult. My sense is that the TDM merger has in fact gone well. Their screwdriver business has faltered, but this is a momentary thing that will hurt the profits of all the PC assemblers. DEC is being bought relatively cheap and with the passage of time cannot back out. DEC has lots of assets that fit end-to-end with CPQ. Add the revenues of DEC and CPQ together and see what the PSR's look like. Look at the debt structure. I think that if CPQ drops another $7-8/share everyone will see it as a cheap stock, hence it won't happen. Finally with your figures on NT v. Unix. I can't find real support for that either. Sure NT boxes numbers are climbing. However if you look at the unix-dollars spent they still dwarf the NT-dollars. Your hope for WolfPack brings up the fact that M$FT paid TDM to develop it for them. I see CPQ playing both sides of that court. I see real synergies with DEC in these areas. I see CPQ spending the time to SET standards. I assume that these efforts will be a real advantage, so that when the screwdriver business can finally be reduced to time and materials, CPQ will have a special value-add to justify a higher multiple. In sum I would see the risk as a non-trivial management risk of doing successful mergers. I'm told that TDM has gone well. Perhaps you know better. Greg