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

To: rupert1 who wrote (58192)	4/16/1999 3:22:00 PM
From: hlpinout	Respond to of 97611

victor, Do Tech Surprises Mean Bail Out Or Buy In? (04/15/99, 6:53 p.m. ET) By Russell Wayne, TechWeb Nothing is sacred in tech-stock land anymore. Dell plunged a while back. Compaq did its deep six a week ago. And now EMC has hit the skids. Who knows which stock will be next? In the case of Dell and Compaq, the surprises were limited. PC sales have been on a tear for an extended period, and experience tells us that there comes a time when things begin to moderate. Over the past few years, PCs have substantially increased their market penetration, much as color TVs did several decades earlier. The cycles are similar. As growth accelerates, profit margins widen. When the peak period of growth passes, price competition heats up, margins narrow, and reality sets in. Dell showed its hand first, indicating the pace of gain was beginning to slow. Its sin was that of growing too fast previously, something that could not be sustained indefinitely. To Dell's credit, its business model remains first rate and one can continue to make a strong case for premium valuation of its earnings. Even so, the market may have a prolonged adjustment to this reality check. Compaq's situation is more difficult. Unlike rival Dell, Compaq does have concerns about inventories and it appears that what's on hand is above optimal levels. Sales aren't quite where they should be and neither is the company's soon-to-be-reported bottom line. EMC's situation, at least for those of us out here in the dark, may be of less concern. The ostensible reason for Wednesday's big drop was a downgrade by the analyst at Nations' Banc Montgomery Securities. It's entirely possible that this downgrade was for substantial reason. It may be that investors are yet to get hit with another surprise, a la Compaq. Or it may be that here's another pro who months from now will prove to have blown it. It wasn't that long ago when Cisco and Motorola were among the market's whipping boys. Last year, they were among the ugliest of the ugly. Cisco was reported to have antitrust problems and Motorola had been left in the dust by Ericsson and Nokia. Neither could do anything right. Fast forward from that point and you have a 50 percent gain in Cisco and a double in Motorola. Contrary to popular opinion, most analysts do not walk on water. Many work hard; some are quite knowledgeable. Even more blow it from time to time. Consider the analysts' plight, however. Much of their information comes from talking to company executives, who seem to have a habit of being in the dark or misleading on occasion. Why else would the market react violently to pre-announcements or reports or problems? When these kinds of things happen, the question is whether to follow the herd or take advantage of a buying opportunity. In the case of the Compaqs and Dells of the investment world, what's taking place appears to be the natural order of things, so perhaps less generous valuation is in order. In less clear-cut cases, such as that of EMC, a more-considered decision may make the difference between taking profits now or taking advantage of the potential for even greater profits later.

To: rupert1 who wrote (58192)	4/16/1999 4:33:00 PM
From: Jeng Chiu	Read Replies (1) \| Respond to of 97611

OT............... Victor, I have owned EMC since 1996 and it has been my most profitable investment. Considering I also have LU, and SUNW, this is actually quite an accomplishment. They dominate their business and their execution has been flawless. The difference between EMC and the other two Ive mentioned is that unlike SUNW and LU who promise 20% year after year growth, EMC has guaranteed 30% year after year growth. They are projected to earn $2.60 next year. At around $106/ share, it trades at approximately 40 x next years earnings. Considering that the company has always been conservative with its promises (unlike SOME PIG company that we both love to hate), EMC could actually grow at a slightly higher rate. These days, it's hard to find a dominant industry leader that trades at a slight premium to its growth rate. EMC is one of those companies. And don't let people fool you with the term "storage", they are much more than that. You buy their hardware b/c you need their software and service. Just my opinion of course.