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

To: Elwood P. Dowd who wrote (45710)	1/27/1999 4:06:00 PM
From: Helen Oliver	Read Replies (1) \| Respond to of 97611

the ML report basically says CPQ is spinning off AltaVista and it should be able to support a market cap of at least $1 Billion as a stand-alone company... Helen

To: Elwood P. Dowd who wrote (45710)	1/27/1999 4:11:00 PM
From: robbie	Read Replies (2) \| Respond to of 97611

El, I can't get that file to work either. TIKI LOUNGE? You're not drinking that virtual beer are you? Got so excited at the close I bought another 600 @46 13/16. CPQ's prospects have never been better. Robbie

To: Elwood P. Dowd who wrote (45710)	1/27/1999 4:25:00 PM
From: .com	Respond to of 97611

CPQ to Spin Off Alta Vista Compaq Computer announced yesterday that it will spin-off 100% of AltaVista in an IPO. The details of the IPO including timing and estimated market capitalization of the offering were not disclosed. However, the proceeds will be used for acquisitions and to fund AltaVista's future operations (AltaVista is already sufficiently capitalized to fund operations for the first year). AltaVista's goal is to transform itself from an Internet guide to the leading destination site for information and ecommerce, and participate in the market for Internet content and services that could be $170 billion by 2002. How does it get there? Well in addition to being a successful search engine in its own right (according to Compaq it is #1 search site of 1998, fastest site on Internet, #1 in ease of use and relevance) AltaVista is able to leverage Compaq's dominate position in the PC market and financial strength. For instance, Compaq announced a deal with Microsoft whereby MSN will power its searches with AltaVista. In return, AltaVista will offer its users free email (name@AltaVista.com) and instant messaging (soon to come) powered by MSN's Hotmail. We doubt that this was the result of any dissatisfaction with Microsoft's current partner Inktomi, but rather it was an opportunity for Microsoft to strengthen its relation ship with its biggest customer. In addition, AltaVista benefits from Compaq's ability to drive traffic to the AltaVista site with a one-touch button on its Presario Internet PC keyboard. Leaning on Compaq's financial strength doesn't hurt either (though after the offering they will be completely separate companies). With last week's acquisition of Shopping.com for $220 million in cash (small potatoes for Compaq, which ended 3Q with $4.4 billion in cash), Compaq bought for AltaVista the capability to execute ecommerce transactions. What's It Worth? We believe that AltaVista is worth at least $1 billion. Like most Internet companies, AltaVista likely will be in the red. Compaq indicated that until 3Q98 it was managing Alta Vista as a breakeven operation but given its aggressive growth strategy and intention to invest in the brand, AltaVista should have negative earnings for the next two years. However, the long term business model could look like a hybrid between Amazon.com and Yahoo, with operating margins around 12%. So, like most Internet companies, AltaVista's value will have to be based on a multiple of revenues. Compaq has indicated that the annual sales run rate by the end of 4Q98 was over $50 million and it is expected to be 2-3x higher by 4Q99. If we conservatively assume Alta Vista's C1999 revenues to be $100 million, and given the 12% expected long term operating margin, ML Internet analysts Jonathon Cohen and Tonia Pankopf tell us Alta Vista could conservatively garner a 10x price-to-sales ratio, for a market capitalization of at least $1.0 billion.