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To: JRI who wrote (105712)	2/28/1999 2:21:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

Good morning John, In your discussion of potential mergers you failed to consider what I believe to be a key point: mergers are done these days with pieces of paper -- not cash. The real issue in M&A analysis is the before and after analysis, or synergies if you prefer. Let me do some analysis on a potential merger with IBM or HWP and I will get back with some specifics to illustrate what I'm talking about. TTFN, CTC

To: JRI who wrote (105712)	2/28/1999 3:17:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

John here's how a potential merger of IBM/GTW could shake out. IBM offers $90 per share for Gateway -- well, not really. What they offer is 0.529 IBM per share of GTW. So GTW shareholders get all excited. Whoopie! An instant premium of 23.7% over market (IBM is currently selling at around $170 and GTW at $72 3/4) BUT, what really happens is that IBM issues 82.6MM new shares in exchange for GTW shares. The combined capitalizations of the companies prior to the merger would be around 168.4 BB, so the value of IBM shares would drop to around $167 3/8 because of dilution, and GTW shares would be valued at around $88 5/8 assuming that the combined capitalizations remained the same. So the "cost" to IBM shareholders is $2 5/8 per share. What do they get in return? They get a brand capable of duking it out with the direct sellers without compromising their existing arrangements with resellers. That is the danger posed by companies like GTW and Micron. TTFN, CTC