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

To: rudedog who wrote (59816)	4/24/1999 8:26:00 PM
From: rupert1	Respond to of 97611

The predominant CPQ/DEC financial issue is not the problem of harmonising their respective accounting principles and practices. That is a logistical problem characteristic of all mergers and acquisitions. The predominant issue is the low price CPQ paid for DEC. EP was strictly correct to say that DEC would become accretive before the end of the 4th quarter. But but too many analysts and financial journalists overlooked the small print in his statements. Becoming accretive in 4Q and completing the restructuring in mid-1999, is not the same as saying that the COMPAQ Classic and the DEC assets will be producing historically higher rates of growth in earnings or profits in the same time frame. Most major acquisitions take between 6-10 quarters to achieve cruising speed. Progress in the DEC acquistion has been quick by most standards, whatever problems remain to be solved. The problems are insignificant compared to the problems COMPAQ would be facing now if it had not made the acquisition. The market looks ahead, and in January, it looked ahead too far and took the share price higher than the fundamentals justified. But the market was not completely wrong to look ahead and expect great things from the DEC acquistion. It was a great deal which will, eventually, be reflected in accelerated revenues and earnings. The dramatisaton of that will be the Alta Vista spin-off. But by then (August-Novemebr?) the other DEC assets will also be achievng higher returns. At some point the market will recover its nerve and start looking ahead again. With a new CEO, Alta Vista and the DEC assets on song, the 4Q might turn out to be very exciting. It will be a gradual build-up starting in this 2Q.