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

To: Jacob Snyder who wrote (41392)	12/28/1998 2:13:00 AM
From: jim kelley	Respond to of 97611

I doubt if you will get any other responses that meet your criteria. That said. I agree that CPQ is a good put play. If you are a little unsure you could straddle.

To: Jacob Snyder who wrote (41392)	12/28/1998 2:27:00 AM
From: Stephen	Respond to of 97611

Jacob ... whatever the fundamentals, if one believes in TA, CPQ looks very strong short term. Stephen

To: Jacob Snyder who wrote (41392)	12/28/1998 2:57:00 AM
From: Aitch	Respond to of 97611

Jacob, I am not very knowledgeable when it comes to options trading or TA, so no comments from me there... My only comments refer to your point 4 where you mention CPQ's business model and compare CPQ to DELL. Firstly, CPQ is not "just a box mover". Management agrees with you re the toaster analogy and has made substantial changes to the model to meet this threat. Vis the merger with Tandem & DEC, (NOT box movers). CPQ's current line up of product includes bread and butter products like toasters, but a significant portion of revenue comes from the higher level, PC Servers and Enterprise Class machines. (According to IDC, more than 50% of PC Servers shipped are CPQ). Also there has been a significant shift towards full service offerings. Have a look at Compaq's website for the "ActiveAnswers" program. There are more examples of this shift in similar value-add initiatives. Secondly, your comment: "Compaq's efforts to imitate Dell will continue to be hesitant and tardy." CPQ is certainly competing with DELL, but in a specific "toaster" arena. Granted DELL is consolidating and aiming at the PC Server market, but these two companies are now in substantially different leagues, so the comparison doesn't really hold water. (By the way, I agree with you, DELL's model, in their arena, is better than CPQ). So, in summary, I don't disagree with all your points, I just think you should consider some other significant factors... Basically, I'm a CPQ bull <g> H

To: Jacob Snyder who wrote (41392)	12/28/1998 3:46:00 AM
From: JAG2	Respond to of 97611

MARGINS increasing to 30% What about CPQ's recent announcement that Digital Equipment was assimilating into their system faster than anticipated. And what about their announcement that margins are growing faster than anticipated, to 30%+. This is the type of news that makes analyst RAISE earnings estimates. I would NOT bet against a stock that has formed a sold base since mid 1997, and that is breaking out of the base because of higher earnings expectations and very positive management comments. There are plenty other DOG'S to SHORT besides a possible sure thing. JAG

To: Jacob Snyder who wrote (41392)	12/28/1998 5:45:00 AM
From: rupert1	Read Replies (1) \| Respond to of 97611

Jacob: Points of disagreement: 1. Market risk. There is no absence of political leadership. If you are referring to the US, Clinton has the highest poll ratings ever, the scandals which have dogged the body politic for about 18 months are about to be put to bed (pardon the pun). There is a new congress. There will be more fed easing possibly as soon as the next meeting. Real interest rates are still high. Inflation is non-existant. Europe begins the Euro in a few days time and this should stimulate growth and economic expansion. The Asian regimes are more stable than they were last year and Japan is gearing up for recovery. Russia might prove destabilising for financial markets for a short period in the next nine months, but its fundamental economic impact will be negligible. There will not be an earnings recession in the US. There might be an aggregate reduction in the growth of earnings. But some sectors will see earnings growth and specific companies within sectors will always have above average growth. Overall, earnings will probably slightly exceed reduced expectations this coming quarter. 2. Company Valuaton. A forward p/e of 24 would not be excessive on the threshold of increased earnings and expectations of $1.76. Most analysts would expect that CPQ p/e would float up and down as high as 30. In fact, the more likely scenario is that earnings for 1999 will be $2, $2.50 and maybe $3. All your other points have been dealt with adequately by Sheik Aitch of the Desert Patrol. This is not to say that I think CPQ's share price will go up in a straight line. I expect fairly regular pull-backs of $2-3 as it ascends and there may be a more substantial pullback if the price goes beyond $50 at the time of earnings or just after. So buy puts at $50, if you are nimble, but it will be risky.

To: Jacob Snyder who wrote (41392)	12/28/1998 8:47:00 AM
From: Kenya AA	Read Replies (2) \| Respond to of 97611

Hi Jacob: Since you referenced P/E ratios in 3 out of 4 reasons why you should by CPQ puts, I assume that you feel they are important. It pretty much has been statistically proven that P/E ratios are not a factor in determining stock price movement. I would be interested in investigating any data or opinions (backed up with facts, of course) that shows that they are. K

To: Jacob Snyder who wrote (41392)	12/28/1998 9:10:00 AM
From: rudedog	Read Replies (1) \| Respond to of 97611

Jacob - You say: PCs are toasters, now, and Compaq's business model doesn't work for selling toasters. Since PC makers can no longer differentiate themselves on service, market share will go to the low-cost hi-volume lowest-inventory producer. But in the 'toaster' category, CPQ is a lower cost producer than DELL. By this argument, you should short DELL and go LONG on CPQ. Look at consumer products. CPQ has shown the ability to make and sell PCs at a price more than 10% under DELL, yet make a 20% or better margin. In the volume, 'toaster' category, DELL is at a disadvantage, since they have the ability to configure built into each machine, and that costs them money. In this category, CPQ also has very low inventory, both on the supply side and on the sales side. Consumer products are built in a single run, the parts are pre-ordered in large volume (at the lowest costs in the industry, in some cases as much as 20% less than DELL's costs - this has been discussed in depth both here and on the DELL thread). The machines are built in a single run of virtually identical configuration. Finally, they are sold before they ever leave the dock - the consumer products have had a 4 to 8 week backlog since 1995, and CPQ maintains that intentionally to keep the outbound inventory as close to zero as possible. You are making the same mistake that many other posters (and some analysts) have made - which is confusing the commercial desktop business, where DELL does have a significant business model advantage, with the consumer business, where DELL has a disadvantage. The market presence reflects this - DELL has never had a significant presence in the consumer business. They don't make 'toasters'. Look for CPQ to move more products into the consumer manufacturing model - especially low end servers. I agree 100% with your argument - you just picked the wrong company as the weak player in the toaster market. BTW I would not short DELL either...