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Technology Stocks : The Learning Company (TLC) -- Ignore unavailable to you. Want to Upgrade?

To: Thomas C. Donald who wrote (5313)	8/15/1998 12:21:00 AM
From: Thomas C. Donald	Respond to of 6318

Asia Crisis Fuels U.S. Boom By DAVID HALE There is little doubt that the economic crisis now gripping East Asia is the most severe shock to the global economy since the end of the Cold War. But it would be wrong to attribute the recent weakness on Wall Street to the crisis. There is no reason for the Asian crisis to depress the growth rate of the U.S. economy. Instead, it is likely to change the sectoral composition of growth within the economy. The crisis will set the stage for poor performance in companies producing tradable goods, but it will also create opportunities for profit in companies catering to domestic consumption. The data on the U.S. gross domestic product for the first half of 1998 illustrate how the crisis has changed the U.S. economy's growth mix. There was an unprecedented expansion of the trade deficit, to $252.9 billion during the second quarter of 1998 from $149 billion during the fourth quarter of 1997. This reduced real annual GDP growth by about 2.4% during the first half of 1998. But total annual output growth still averaged about 3.5% because domestic demand grew at a 6.5% annual rate compared with 2.4% during the fourth quarter of 1997. This upsurge was not a lucky accident, but the result of three positive side effects the crisis has had on the U.S. economy. First, the risk of further financial collapse in Asia and elsewhere has deterred the Federal Reserve from raising interest rates to slow the growth of domestic spending. As a result, the U.S. economy is enjoying higher growth rates for home building, commercial construction and retail sales than it would have without the Asian crisis. Second, increased foreign demand for American equities and other U.S. financial assets has helped the U.S. withstand the Asia trade shock. The Asia crisis created a surplus pool of global liquidity that has driven U.S. equity prices to unprecedented levels. Foreign investors purchased U.S. equities at an annual rate exceeding $100 billion during the first quarter of 1998, compared with $66 billion during the whole of 1997. The buoyancy of the equity market has boosted household wealth while sending the household savings rate down to only 0.6% during the second quarter, from 2.6% one year ago. Third, the U.S. has benefited from the impact of the Asian slump on global commodity and import prices. Both have fallen across the board during recent months, helping to boost consumer income by lowering inflation. In fact, it appears that commodity-producing countries will suffer the brunt of the Asian shock wave. Already, the oil-exporting countries have seen their trade balance deteriorate by $61.9 billion compared with only $13 billion for North America. By contrast, the income gains in the U.S. resulting from the decline in import prices appear likely to exceed 1% of GDP this year. ... From an editorial in the Wall Street Journal on 14Aug98

To: Thomas C. Donald who wrote (5313)	8/15/1998 2:47:00 AM
From: Obewon	Read Replies (1) \| Respond to of 6318

Thomas: You may be right about the split of Cendant software into its component games and education software components. I would give the chance as about 30% with the remaining chances being IPO (20%) and sale of the entire business (50%). As for your question about which product would sell better, the obvious answer would be the educational and games software that Cendant currently owns. Please imagine the increase in volume that certain games have seen when they are bundled with new PCs. Yes, the products carry lower margins but they normally make better money in the long run due to volume. The main way I see a Microsoft - Cendant Software deal as profitable is in the decreased overhead and distribution costs that Microsoft can achieve. Additionally, it allows Microsoft access to a major database of consumers they currently don't have. Remember the rebate programs that still are prevailent in the industry? A major advantage of the rebate model is that the company gets to gather ALOT of information on its consumers which it can then use to market and position its products (or even sell to outside marketing firms who pay by the name). Microsoft has never been aggressive with any rebate programs in the past. Cendant Software most likely has millions of names in its database (since it was part of Cendant). I'm sure Bill could find some way to use it to increase Microsoft's sales. OB