Conference 7.286::digital

    Line 1 should read our not out. sorry for the typo
    

    So what will they call us then:
    
    HiDec
    FuDec
    MitsuiDec
    ToyDec
    
    
    What a precarious situation.
    
    Dave
    

    I believe that our Book Value is somewhere around $67/share. Rarely
    does a liquidation bring cash at exactly book value, usually it's
    substantially less. Either term is normally used in case of a
    liquidation, which few readers of this conference would like to see. 
    
    Oriental companies were not the only ones mentioned last time stock was
    low. How about a fleet of Taurus'ss whose drivers wear buttons that
    say: 
    
    I'm ForDec!

    Book value is $68.00 I believe.
    
    Special!  Today only!  You can buy Digital for only 6.7 Billion
    dollars!  (122M shares outstanding X 55 $/share to be simplistic)
    
    (Not a bad deal considering the low debt-to-equity ratio, the $2B in
    cash, and the value of the land holdings which don't show up on the
    balance sheet)   Digital could probably be acquired today for only
    about a billion dollars in cash.
    
    Raiders have no interest in book value, because the company can't be
    broken up.  There are no clear-cut divisions to sell off (Heck, there
    isn't even any clear-cut organizational structure at all! ..but that's
    another topic.), and there haven't been any big acquisitions which
    might be easily spun off.  Digital is truly one cohesive company.
    Anyone desiring to acquire the company would have to actually want it
    as a long-term investment to manage and run as a continuing concern.
    
    I wouldn't worry about a hostile takeover for two reasons:
    
    1.  The above (It wouldn't be broken up and sold off by a raider)
    and
    2.  Anyone who takes it over and wants to run Digital as a continuing
    company would slash and cut through the old-boy network, and would
    probably end up running the place at least as well as some of it is
    currently being run.   Heck, if some large company such as Hitachi were 
    to do something radical and just plain buy Digital, I'd feel pretty 
    good about the whole thing for the long run.   ...but that's just my
    own personal opinion, of course.
    
    -DM-

    I just wanna know, if Hitachi bought us out, would I get a new 27'
    monitor or Hi-fi VCR for X-mas?
    
    or...the old pink slip.
    
    Our stock just hit 54 something. Doesn't look like they have too much
    confidence in us does it.
    
    Dave
    

    Too many errors in this note to bother entering the discussion.
    
    This discussion belongs in SUBWAY::INVESTING anyway.

    Re: .5
    
    >I just wanna know, if Hitachi bought us out, would I get a new 27'
    >monitor or Hi-fi VCR for X-mas?
    
    I did not know that DEC produced X-mas turkey.

    Re .6
    
    I'm very interested in this topic, and I don't know much about it.
    Now the requisite lame jokes and whistling-past-the-graveyard have
    been entered.... Pat Sweeney: please educate me on this topic.
    
    What are the "too many errors?"
    
    Recently the company enacted some kind of poison pill to help fend
    off hostile takeovers. How does that figure into this.
    
    Do you think that DEC at $50/share is a serious takeover target?
    

    I dont know much about the investement/stocks world, so execuse my 
    ignorance in asking this question, If the value of a stock goes down,
    why should that affect a company from the point of few of how "good"
    it is ?, after all the stock market is a numbers games, I mean when
    a stock goes down 10 % in one day, the company is still the same as
    it was the in the morning.
    
    I guess Iam asking what is the connection between the value of a stock
    and the "goodness" of a company like Digital ?
    
    /naser

re: 1195.9

In theory, the price of a stock reflects investors expectations about a company,
especially relative to other available investments, including those in the same
industry.

However, sometimes an exogenous event, such as the Iraq situation occurs, 
affects either the entire stock market or a particular set of stocks. In such 
cases, price changes may or may not reflect expectations about a particular 
company. 

What really matters, independently of the above, is the relative performance of 
a stock to other stocks. For example, if DEC stock declines by 10%, but 
other computer stocks decline by more, then that is good, unless DEC stock price
has already been driven very low before the others. Remember there are forces 
that drive don/up a stock's price other than the state of the company.

    re .9
    
    It doesn't.  That's capitalism for you.

    The price of DEC stock is determined by what a willing buyer will pay a
    willing seller. This may sound trite but that is all there is to it.
    
    Ap present buyers aren't willing to pay much over $50 a share, so that
    is what the stock price is today.
    
    The stock price is not DIRECTLY affected by anything the company does.
    What affects the stock price is what buyers and sellers think of DEC
    the company relative to other potential investments. At present they don't
    think much of DEC. I'm hoping that will change because I own DEC stock.
    
    Dave

    Answer the question:  Who would buy us?
    
    #1.  Foreign investment....No, the government wouldn't allow
    it--national security and all that.
    
    #2.  IBM...Nahhh, monopoly--government wouldn't allow #1 to buy #2.
    
    #3.  Other computer company...they are all in not-so-good shape either.
    
    #4.  Corporate raider....they're all broke or in jail.
    
    #5.  Us (you and me)...Hmmmm....

re .13:

>    #2.  IBM...Nahhh, monopoly--government wouldn't allow #1 to buy #2.

DEC is now #3.  Hitachi+ICL is #2.

    
    > DEC is now #3. Hitachi+ICL is #2.
    
    Unfortunately, Futijti (sp?) is #2.
    	

>    Unfortunately, Futijti (sp?) is #2.

	Unisys was #2 for a while after they started. It didn't last long.
	I don't really expect us to be number 3 all that long. I've got
	to believe we'll be doing quite a bit better in the not too far
	future.

			Alfred

    Well, here it is, 3:30pm on the west coast and I just noticed our stock
    is trying real hard to break the $50 mark, it's now down to $52.12
    
    Is this the lowest it has ever gone, exluding any splits? Think it will
    go lower than $50?
    
    Dave
    

    DEC stock at $50 per share would be attractive to a Corporate raider
    if they could secure financing for a LBO.   Once they get the
    financing, they could use the cash to pay it off.  Right now,
    all the institutions that would finance this are being controlled by
    RTC.  
    
    I don't think the average American had any idear that overborrowing
    from S&L's was a major component of the 8 year bull market.  It usually
    takes some financial crisis to send capital markets down.  The same
    thing happended in the early 70's when Citibank almost went under
    because of  Latin Debt.  Becuase of potential political ramifications,
    the Nixon/Ford administrations bailed them out.
    

    re .15 etc:
    
    It's Fujitsu + ICL.
    
    When Unisys was formed, DEC fell to #3 for a while, but not very long.
    Whether that will be the case with Fujitsu + ICL remains to be seen...
    of course, we're still the second biggest American computer company.
    

re .15:

My mistake.  I meant Fujitsu.  There's an article in today's Boston Globe
about Fujitsu's strategy in the computer market.  They intend to start in
mainframes and fault-tolerant computers, and sell only outside the U.S.

    $50.375 at 1 P.M...  anyone for the 40's by Friday?  Hell, at this rate
    I might buy the company next week!!!

Well we're now down to the 40's (49 7/8).

    That's not a milestone unless we're on the road to h*ll

    Quick, throw out everything that's heavy before we go down! We have got
    to gain altitude fast!
    
    

>                     <<< Note 1195.21 by COOKIE::LENNARD >>>

>    $50.375 at 1 P.M...  anyone for the 40's by Friday?  Hell, at this rate
>    I might buy the company next week!!!

I'd wait a bit longer than that. Someone told me recently that if you look
at a graph of the stock over the last 4 months, it's pretty much a straight
line down. Apparantly if you project this line into the future, the stock
becomes $0 in about 8 months time.

Craig.

    
    From "Digital News", 20-Aug-1990, article by Sonny Monosson (reproduced
    wothout permission):

    
			HOLD ON TO YOUR DEC STOCK
			-------------------------

     After a few weeks of travel, I attended a cocktail party where I was 
approached by an investment banker who wanted to know my reaction to 
"the news."  Having been in an airplane and taxicabs for the last five hours, 
I asked, "What news?"  He gave me a shocked look and said Digital Equipment
Corp. has reported its first quarterly loss in history and that it was 
suffering a dramatic drop in annual profits from $1.07 billion in 1989 to $74.4
million in 1990.

     The investment banker offered me a cocktail to help digest this news.

     The next day, back in the office, I received calls from reporters with
similar questions, and I gave them the same answer I had given to my banker
friend.  The answer I gave was one that any professional politician would have 
been proud of because after speaking for a few minutes, each inquirer responded,
"Sonny, I didn't follow you."

     That night, my wife Gloria and I went out to celebrate our wedding 
anniversary with some of our closest friends.

     As soon as we sat down at Saperito's, a fine restaurant in Hull, Mass., 
and before we could even toast my wedding anniversary, my female friend, who
dabbles in the stock market, said, "Sonny, should I sell or keep my DEC stock?"
"Marge," I answered, "this is a purely social evening, a special event.  Let's
keep it that way."  Marge invests in many stocks, follows them and tries to 
come up with winners, and if I had to guess, I would say she might own 100
shares of Digital stock.  By the time our dinner group had three toasts, Marge
asked again, "Sonny, should I buy or sell my DEC stock?"  This time, I reacted
differently.  I said, "Keep your 100 shares."

     The next day, I received a telephone call from someone who said he was a 
former friend of my late father's.  He knew I followed DEC and asked if I would
please tell him whether he should sell or hold his DEC stock.  I told him to 
hold it, and he thanked me and wanted to know what my favorite charity was.

     That Saturday, I was at home working on my seashore garden when two 
gentlemen approached me and put the pressure on me to give a donation to the
"summer" temple.  After all, they said, "I supported the "winter" temple and 
obviously I like summer.  Being an easy mark, I said, "OK."  As they were 
leaving, one of the gentlemen said, "Mr. Monosson, should I sell or hold my
DEC stock?"  By now I was conditioned to this questions and so I simply said,
"Hold."  He thanked me for my gift and gave me a short blessing for the advice
and left.

				WHAT IS DEC'S FUTURE?
				---------------------

     By now, I was thinking that no one had asked me about DECworld 1990, the 
monstrous sales and marketing event for Digital customers that had transpired
only a short time before.  The only questions people had asked me were about
DEC and its future.  I had not given it much thought before -- more people are
interested in the financial results of a company than about the products and
services it offers.  People were having difficulty translating the year-end 
Digital financial results into how they should react to these figures.  The
answer was simple, but everyone was making it complex, and so I decided to 
write my own version of the Digital financial story.

     After all, DEC announced a $550 million charge to 1990 profits as a 
restructuring charge.  It is true that fourth-quarter Digital earnings actually
went down, but I would have expected this, taking into account the large number
of new products the firm has announced.

     You and I know that Digital has fine products and a good customer base, is
a leader in technology, has a dynamic president, and, from the way it appears,
is a capable successor.  So why would I -- if I owned and DEC stock -- want to 
sell it.

     I have always wondered how multibillion-dollar companies, with many 
products and international distribution, know what their real profits are.  How
do they value their research and development efforts?  How much is unseen and 
is a variable profits?  How about software development  What do you capitalize
and what do you write off?

     How do you value the loans in the banking system to the third-world 
countries and real-estate ventures?  We have all seen the results of not being
realistic and conservative.  We are still playing games with third-world 
countries' debt as a political tool at the bank's expense.

     Or how about when Ford Motor Co. or General Motors Corp. decides to write
off tools, dies and marketing distribution, and takes a large write-off?  Even
General Electric  Co., supposedly the finest run company in the world, has 
these problems.  Did the company not just take a reserve for accounts receiv-
able in one of its divisions?

     It seems to me that companies grow and show profits; and although this
happens, a certain amount of nonproducing assets accumulate, such as inventory,
accounts receivable, fixed assets not utilized and absolete R&D.

     But a question arises:  When do you lump all these items together and 
take the write-down that you probably should have taken every year -- or
rather every quarter?

     You know the pressure that exists -- best last year's sales volume, beat
last year's profits -- and key motives are bonuses and stock options.  

     I would imagine that if Digital, IBM, Ford, General Motors and General
Electric took these changes and wrote them off quarterly it is possible that
the companies would never show quarterly or annual losses.  But the dramatic
increase in profits would not be there very year -- and neither would the 
large cash bonuses and stock options.

     When companies basically have good products, efficient production and 
distribution, and are multibillion, multinational and multiproduct companies,
you can expect these periodic reserves against earnings and a quarterly over-
statement of profits.

     What has all this got to do with DEC?  To me it means that DEC is now a
confirmed member of this select club -- the club that can afford to write off
a half-billion dollars in one year.  Other members of this club have written
off from $1.2 billion to $300 million dollars annually.

    Would I sell my stock in this select club, the backbone of America's 
economy?  Well, you heard it earlier, "Hold! Hold! Hold!"

     

          Sonny Monosson is the founder of "The Monosson Report on DC and IBM."
          He can be reached through Digital News, 33 West St., Boston, Mass.
	  02111.  He welcomes your questions and comments.

    

I'd like to know why, when these financial analysts predict "doom" and "gloom"
for DEC, everybody here laughs at them and claims that they just dont
understand the company nor the company's business. But, when these same
analysts predict good things for DEC then its "look at what these experts are
saying".....

- George

    Re -1....a normal human reaction to a very stressful situation, I
    suppose.  I wonder when this craziness will stop.  Can you just
    imagine how the big institutional investment managers are feeling
    about now?  I'll bet a few are out on the street for holding onto
    DEC stock too long.
    
    I was mentally trying to figure out when I would seriously buy a
    chunk of DEC stock, with the idea of making a quick buck.  Somehow
    $25.00 feels comfortable at the moment.
                                                         

      <<< Note 1195.6 by STKMKT::SWEENEY "Patrick Sweeney in New York" >>>
                            -< Conference pointer >-

    Too many errors in this note to bother entering the discussion.
      <<< Note 1195.6 by STKMKT::SWEENEY "Patrick Sweeney in New York" >>>
                            -< Conference pointer >-

    Too many errors in this note to bother entering the discussion.
    
    
    	Patrick, what a helpful thing to write!!  You're kidding, right?? 
    If you're not, I'm signaling you now from our Augusta plant.. can you
    see me??  [;^(
    
    
    Steve Greve in Augusta

	Re: .30

	Steve, please understand that we just hashed this issue out pretty
thoroughly in the Investing notesfile (to which Pat is a key contributor and
moderator).  He wasn't trying to brush off the question, but rather was trying
to give everyone a pointer *to* that discussion without replicating it all here.
There really is a lot of good info in that discussion (the whole notesfile,
actually) if you'd care to look at it.

								-craig

    
    
    
    
    	Thanks, Craig... that's helpful.