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

To: Dave who wrote (25696)	5/7/1998 8:42:00 AM
From: William Hunt	Respond to of 97611

THREAD --- A couple of tidbits not in yesterdays news : The Wall Street Journal -- May 7, 1998 Technology Journal: Compaq to Reduce Digital Work Force By 28% After Deal ---- By Jon G. Auerbach and Evan Ramstad Staff Reporters of The Wall Street Journal Compaq Computer Corp. plans to cut about 15,000 jobs at Digital Equipment Corp., or about 28% of the company's work force, after Compaq's proposed acquisition of Digital is completed, according to people familiar with the matter. Those numbers are significantly higher than the 10,000 figure Compaq insiders had originally estimated and suggest that Compaq, which is facing its own financial pressures, plans to move aggressively to cut costs at Digital. Since Compaq announced the proposed $9.5 billion acquisition in January, the world's largest personal-computer maker has stumbled due to inventory problems and intense PC price competition. The layoffs will most likely come from Digital's personal-computer division, some parts of its sales force and some corporate computer operations that overlap with Compaq's business, say people who have heard Compaq's views. Spokesmen for Compaq and Digital declined to comment on the specifics of any reductions. Digital had about 53,500 employees at the end of the last quarter. At its peak in the late 1980s, Digital's work force topped 130,000. Compaq says it plans to cover the costs of the consolidation by taking an estimated $1.5 billion to $2 billion one-time, pretax charge in the second quarter. Several analysts speculated some Compaq jobs will also be eliminated after the merger. A Compaq official acknowledged that idea is being considered but said no decision has been reached. Compaq has about 31,500 employees. Digital said in a filing with the Securities and Exchange Commission that its selling, general and administrative costs are expected to be cut in half after the deal is completed. In 1997, these SG&A costs accounted for $3.18 billion, or about 24% of Digital's total revenue of $13.04 billion. By contrast, Compaq spent $2.95 billion in SG&A, or about 12% of total revenue of $24.58 billion. Separately, Digital said Chairman and Chief Executive Robert B. Palmer will be eligible for a severance package valued at about $6.5 million if his employment is terminated after the deal is completed. Mr. Palmer isn't expected to remain with Compaq after the transition is complete. The severance package was calculated based on three years of salary and bonus, Digital said. On top of that, Mr. Palmer will be eligible for an adjusted 1998 bonus if he leaves Digital before the end of June. The severance package also entitles Mr. Palmer to receive full compensation for any excise taxes imposed on his severance package. Excise taxes are levied on severance packages by the Internal Revenue Service and typically amount to about 20% of the total package, say Digital insiders. After the deal is completed, Mr. Palmer will be eligible to acquire just over one million stock options. Of those, about 630,000 were already exercisable, and another 426,950 will become exercisable after the deal is completed. Digital says the average cost of all the options is about $45, which would give them a value of about $14 million based on Compaq's price yesterday of $31.25 in New York Stock Exchange composite trading. Compaq shares rose 68.75 cents on the day. Digital shares also rose 68.75 cents, to $58.6875 in Nasdaq Stock Market trading. BEST WISHES BILL

To: Dave who wrote (25696)	5/7/1998 8:51:00 AM
From: Bazmataz	Read Replies (2) \| Respond to of 97611

Anyone know why CPQ announcement about dropping 15k Digital employees didn't move the stock any more? In fact, the stock seemed to drop a bit around the time of the announcement. I would've thought this announcement would boost the stock - cutting costs and all. Maybe the 1.5-2 billion dollar charge offset the positivity.. Any thoughts? Baz