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To: rudedog who wrote (85760)	12/16/1998 7:02:00 PM
From: jim kelley	Read Replies (1) \| Respond to of 176387

Rudedog, I think your estimates are way off. Look at the Q3 10-Q page 13. CPQ is not getting 7% pretax margin. It is getting 1.86% pretax margin. CPQ has a very high operational cost structure which can not be effectively reduced without layoffs and restructuring. Unfortunately, layoffs and restructuring are slow and they require heavy initial cash expenditures. Such expenditures deplete working capital. My estimates are based on the following assumptions. I am expecting the service business to be flat sequentially but profitable. I expect the computer business to be up 13% sequentially. This sequential growth is on a par with last year. I think this is a very reasonable number. Also remember that last year's 13% growth took CPQ 2 quarters to digest. Do you have any new information that could change these conclusions? Regards, Jim Kelley