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

To: John Koligman who wrote (24529)	4/17/1998 2:02:00 PM
From: Roads End	Read Replies (1) \| Respond to of 97611

One of the reasons for the difference in margins for software/hardware vrs service is the R&D is not included in in gross. There is no R&D in service. Also associated with soft/hard is higher S&A not included in gross. Steve

To: John Koligman who wrote (24529)	4/17/1998 2:07:00 PM
From: John Koligman	Read Replies (1) \| Respond to of 97611

Harry, I also looked at CPQ's annual report just now, and I cannot find any breakdown of gross margins by business line. All they provide is an overall number, which is 27.5% for 1997, 25.8% for 1996, and 26.3% for 1995. John

To: John Koligman who wrote (24529)	4/17/1998 7:25:00 PM
From: Harry Landsiedel	Read Replies (1) \| Respond to of 97611

John Koligman. Re: Service margins. Thank you for that detailed response. I was generally aware of IBM's recent trends but had not kept track of the margins. I know with the purchase of DEC that CPQ's hardware margins will go up, since I believe Digital's hardware GPM is over 30%. However, it does not look like service will build margins all that much. Will try to get a look at Digitals web site to see if they break it out. Re: IBM's recent results. I am amazed how the street keeps supporting IBM. I bought some several years ago and sold the last in December at 105. It seems to me that after Merced comes out, IBM's lucrative hardware business will be under attack from leaner and meaner competitors. We'll see. HL