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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: BGR who wrote (123301)	5/7/1999 11:11:00 PM
From: Chuzzlewit	Read Replies (2) \| Respond to of 176387

Not necessarily. ROIC is the ratio of earnings divided by equity plus LT debt, so the question of ROIC hinges on the capital required to put the deal together. ROIC is an important measure of the financial efficiency of the business, but it is not an appropriate metric for use in valuation. So long as a company invests in projects that exceed its average weighted cost of capital the value of its stock should increase. But that does not adequately address the issue you raised. Generally speaking it is cheaper to build rather than buy, but in this case the reason to buy is to keep the business out of the hands of the competition. The potential loss of market share must be included within the analysis, so I would suggest using a worst-case baseline for the calculus. In other words, what would Dell look like if CPQ bought GTW and used it to bridge the channel gap, vs. what would Dell look like if it bought GTW and prevented CPQ from adopting that strategy. TTFN, CTC