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

To: Red Scouser who wrote (42868)	1/10/1999 8:16:00 AM
From: Christopher	Read Replies (1) \| Respond to of 97611

Red, Good article. It gives a reason for the Pennant I have been talking about. Notice that Dell was not mentioned in that article. I am not sure why. Christopher

To: Red Scouser who wrote (42868)	1/10/1999 11:10:00 AM
From: Elwood P. Dowd	Read Replies (6) \| Respond to of 97611

AltaVista… Sell or Spinoff? Analyst summary compiled by Peachtree Market Trends. All information presented herein is strictly the opinion of the compiling analyst. We make no assurances for the facts that we detail and recommend that no investment decision be made solely on the basis of this report. Much has been made lately regarding what may become the most significant strategic decision that Compaq has ever faced: To sell AltaVista or use the asset internally to build shareholder value. Let us first consider the economics associated with the spinoff. Internet stocks have been the ironic beneficiaries of the long-term vision held by the current bumper crop of short-term traders. The lofty valuations have created market caps among search engines that rival any brick and mortar company on any exchange. Yahoo, for example, has a market cap of roughly $31 billion. Lycos, their smaller but still well-known cousin, has a market cap of $3 billion. AltaVista, if it were an independent company would presumably be somewhere in-between. But since AV has yet to jump into the cold waters of free market trading, how do we derive its value. If we used daily hits as a benchmark with which to compare AV to Yahoo, the market cap would be slightly less than $10 billion. This analyst, however, feels that hits alone is an unfair proxy with which to forecast market cap. Yahoo has brand equity that amongst net surfers that rivals Coca-Cola's amongst thirsty consumers. Therefore, I choose to apply a conservative "adjustment" factor of 50% to the $10 billion dollar estimate, and give AV a phantom market cap of $5 billion. Now $5 billion sounds like quite a little kitty of cash, but what would it mean for CPQ stockholders. Consider that CPQ has a market cap of around $75 billion. For CPQ, the AV valuation that I presented would only translate to a gain in stock price of about 7%. So despite the mechanics of the spinoff (and the most logical assumption is that CPQ shareholders get x shares for every x shares of CPQ that they hold), the value of the new company would not be a landslide victory for the longs. Some would even argue that CPQ's trading range is plus or minus 7%, therefore making the spinoff something akin to a rounding error. Which leads me to… CPQ should and will hold AV as an internal asset and become a leader in the coming boom of e-commerce. The combination of a world-class search engine, combined with their strong position in the server market, puts CPQ in a position to be the tier one provider of large-scale e-commerce solutions. Consider that Amazon.com is up and running on CPQ servers with the AV search engine navigating consumers through its virtual shopping experience. But not only can CPQ handle the technical demands of millions of online consumers, with AV it can also help bring them to the door. No other company can bring both aspects of an e-commerce solution to its customers Competition will be tough, make no mistake, but this will be the largest opportunity that high tech has seen since the creation of the PC, and everyone who enters this arena with a solid strategy will profit. Peachtree Market Trends Initiates a BUY rating on CPQ.