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Author: StevesStox Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 14303  
Subject: OT: Which FKA Would You Choose? Date: 11/19/2012 12:03 PM
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If you had to make a signficant wager on one of these 3 stocks bouncing back (HPQ, DELL, RIMM) which would you pick and why?
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Author: stillwater9999 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12901 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/19/2012 12:21 PM
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I would rather catch a knife in the chest (or a flaming piano thrown off the cliff by Roadrunner) than buy any of those three.

I did nibble at some AAPL on Friday, hate technical analysis but that 507 low looks like it should hold for awhile.

Also bought some DLTR and CLB recently.

My other big add (most compelling story) remains as previously disclosed.

sw

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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12902 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/19/2012 3:13 PM
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(HPQ, DELL, RIMM) which would you pick and why?

I'd buy them in that order.
HPQ is very cheap, and has a mix of businesses some of which are very valuable and probably sustainable.
They won't out-IBM IBM, but they might under-IBM them and still be profitable.
Dell has had very nasty erosion in their return on assets, and I don't think they're a big winner in future as in the past. Tough business to be in.
RIMM I think is headed the irrelevance way of Nokia...strong niche now gone, nothing else.

This opinion plus $2.45 will get you a grande latte.

Jim

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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12903 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/19/2012 3:14 PM
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(HPQ, DELL, RIMM) which would you pick and why?

PS, for a not-answer to the question, I'd rather have STX,MSFT,INTC.
And I do, in fact.

Jim

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Author: araroot One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12905 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/19/2012 10:04 PM
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All of these companies (except RIMM) generate substantial free cash flow. I look at what they are doing with these cash flows recently.

MSFT: bought Skype for 8B. Any synergies so far? Hard to see.
They are also throwing bunch of money at Bing.com

INTC: bought McAfee for 8B. A chip maker buying security software. Makes no sense whatsoever.

HP: bought Autonomy for 10B to compete with SAP. This move was considered so bad that CEO was fired.

Compare these with Dell. Yes, 2009 acquisition of perot was hard to understand. However, recent acquisitions of SonicWall, Quest software make lot of sense. All are relatively smallish tuck-ins which directly support their move to become enterprise hardware vendor.

Plus, the founder / owner Michael Dell is very much in charge.

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Author: tulula Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12906 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/20/2012 6:30 AM
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MSFT: Don't forget the $47b bid for Yahoo! It was by sheer luck
that shareholders were spared. And Skype was not only a costly
acquisition, but also a shot in the foot for Microsoft as it is
hurting relation to carriers/operators.

First come the innovators, then come the imitators, last come the
idiots. Microsoft managed for decades to thrive in the second
group. They typically didn't get it right the first time. But by
the second or third attempt they managed to elbow out their
competitors.

This time around, Apple landed in the first group, and
Google/Samsung are squarely in the second. What about Microsoft?
The jury is still out on Windows Phone, but they've got a tough
job and can't rely on leverage from their dominant position in
Windows the way they used to.


STX: Great discussion recently and compelling arguments! Here's a
small detail that makes a question raised by khrushchv -- whether
they can continue making boatloads of money with the expansion
from retail to enterprise clients -- a very valid one:

dbAccess 2012 Technology Conference
Darren Thomas, Dell VP, Enterprise Storage
September 13, 2012
"...I think the closer you get to the hardware, the IP; it's
probably going to come from established players today. And
we're okay. I think if you look there's a model that says the
IP that touches the customer is the IP the customer cares the
most about. The IP that's buried in the machine -- just take
a hard drive. The IP buried in a hard drive is unbelievable.
I mean, they're flying heads using aerodynamics and
halo-effect transistors and stuff that most people don't
know anything about. And these guys are brilliant scientists,
but I'll guarantee you I make more profit off a hard drive
than Seagate does. And the reason is because I'm closer to the
customer and that has always been the case. I'm not telling
you guys anything you don't already know, the closer you are
to the integrator that hands it to the customer the more
profitability you're going to make.
"...


It seems all bits of storage are not created equal. With the
expansion coming from the enterprise sector and Seagate
predominantly in retail, is it really clear they can keep making
the proportional share of profits from the switch?


HPQ: Unlike Dell, which are very clear what they aim to and have
an owner-operator, HPQ is still tottering and soul-searching after
their 3rd CEO in the last 10 years. The Autonomy deal and bidding
war with Dell for 3Par (Dell wisely backed away) under the
previous CEO tell me they're worse capital allocators.

And Dell, the discrepancy between what they're saying in their
reports, presentations, conference calls and conference
transcripts and their perception in media and among investors is
amazing. That by itself might hint at opportunity. I guess both
sides can't be right here and lately FWIW management did came out
as somewhat promotional on at least one occasion.

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Author: DrtThrwingMonkey Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12907 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/20/2012 7:41 AM
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"...the closer you are
to the integrator that hands it to the customer the more
profitability you're going to make."...

===

It seems all bits of storage are not created equal. With the
expansion coming from the enterprise sector and Seagate
predominantly in retail, is it really clear they can keep making
the proportional share of profits from the switch?



I will have to look this up, but my impression was that Seagate already sold most of its hardware to the 'integrator', not directly to the customer. Apart from a few replacement hard drives or external drives, don't they already sell most of their drives to Dell and HPQ and the others? Maybe there's a sticker on the computer somewhere, that says who made the hard drive, but I doubt that Dell is paying extra to Seagate to get that Seagate name on the sticker.

dtm

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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12908 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/20/2012 7:58 AM
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It seems all bits of storage are not created equal. With the
expansion coming from the enterprise sector and Seagate
predominantly in retail, is it really clear they can keep making
the proportional share of profits from the switch?


Seagate is traditionally the leader in enterprise.
It's this expertise that let them crush most of the minor competitors, who
simply didn't understand the reliability chain needed for that market.
Only recently have they given up the lead to WD because of WD's purchase
of the Hitachi unit. It's not as if Seagate doesn't know how to sell there.
Before the WD/Hitachi deal 1% of WD drives went to enterprise clients,
27% of Hitachi's drives, and 65% of Seagate's drives.
Further muddying the market share waters, Seagate bought Samsung's drive unit.
Overall, the two are relatively neck and neck in enterprise these days,
with WD in a moderate lead and Seagate attempting a claw-back.
Whether that works this year will depend on how well the Consellation
series is received, but in any case it's not as if they're an also-ran.
More like a highly competitive duopoly.

As for the argument the Dell fellow is making—
It's true that the supplier closer to the client often gets a better
shot at the value added for the whole chain. But so what?
Porsche might make the most margin on a car, but Bosch might be just
as good or better investment from what they make on supplied components.
Bigger issues are the returns on capital employed and the longevity
of the business model, not who gets the biggest share of wallet.
As an aside, the rule of thumb isn't particularly reliable either.
Often the component makers have very much better business economics.
Intel does better than HP on a PC sold, Boeing does better than Delta.
In hard drives, I'll bet Seagate makes way more from the drives in
Amazon's data centres than Amazon does.
Plus, of course, following his reasoning the consumer HDD market
should have higher margins than enterprise, but the reverse is true.

Jim

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Author: DrtThrwingMonkey Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12916 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/20/2012 6:12 PM
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HPQ is very cheap, and has a mix of businesses some of which are very valuable and probably sustainable.
They won't out-IBM IBM, but they might under-IBM them and still be profitable.
Dell has had very nasty erosion in their return on assets, and I don't think they're a big winner in future as in the past. Tough business to be in.
RIMM I think is headed the irrelevance way of Nokia...strong niche now gone, nothing else.


Another day, another reason to see why HP is so cheap! With today's Autonomy flameout, both companies are down about 60% from this time last year, with HPQ actually the slightly worse performer than RIMM.

I can sympathize with HP shareholders since I have done equally awfully with RIM, and I compare them to two burning houses:

HP has a good fire going, but lots of the house still intact. Unfortunately, the firefighters (the board of directors) are throwing gas on the fire to try to put it out.

RIM has a raging fire, and the fire is so bad, even the best efforts of its competent board are unlikely to succeed in putting it out. There might be something valuable in the basement when the house has burned to the ground, but we're not sure.

So if you place your bet on HP, you are thinking that the arsonists in firefighters' clothing might get thrown out and some real firefighter put in their place. If you bet on RIM, you are thinking that there might still be something left of the building by the time the fire is finally out, either a viable part of the house, or the IP treasure in the basement.

It's pretty hard to judge the odds on these two awful performers, but I am still more comfortable with the bet on putting out the fire rather than the bet on putting out the gas-throwing firefighters.

Regards, DTM

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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12920 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/21/2012 11:09 AM
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HP has a good fire going, but lots of the house still intact. Unfortunately, the firefighters (the board of directors) are throwing gas on the fire to try to put it out.
RIM has a raging fire, and the fire is so bad, even the best efforts of its competent board are unlikely to succeed in putting it out.
There might be something valuable in the basement when the house has
burned to the ground, but we're not sure.



To torture your metaphor more, I think of RIM as a house seriously on fire,
probably mostly burned to the ground already.

I think of HP as a subdivision with several smaller fires: some houses may survive nicely.
On the down side, nobody has even called the fire department yet.

Jim

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Author: rubberthinking Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12921 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/21/2012 11:29 AM
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I think of HP as a subdivision with several smaller fires: some houses may survive nicely.
On the down side, nobody has even called the fire department yet.

Jim

not the point....who says HP or INTC or MSFT will ever be a hot spot for growth again?

initially machines replaced humans.....thousands of engineers with slide rules......per company.......now machines replace machines......for the most part.......it is not always a cost savings......and it is certainly not the mass alterations to major corporations we saw in the 1980s and 1990s.....

HP is not worth much of a discussion......

Dave

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Author: DrtThrwingMonkey Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12922 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/21/2012 12:45 PM
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To torture your metaphor more, I think of RIM as a house seriously on fire,
probably mostly burned to the ground already.

I think of HP as a subdivision with several smaller fires: some houses may survive nicely.
On the down side, nobody has even called the fire department yet.



Further cruelty to the metaphor:

The RIM fire brigade is on the way, but won't arrive until January 30th, which will probably be too late. If they arrive on time, then it could be a pretty splendid house.

The HP fire brigade hasn't been called yet, in fact there will be people (current management) with known arsonist tendencies who are trying to prevent that phone call from being made. Whatever happens, it is a house (PC business) with serious structural faults, which may mean it has to be torn down in a few years anyways.

RIM is more like a lottery ticket, HP is more of a disgusting cigar butt, but at a very attractive price for that one last puff.

DTM

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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12923 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/22/2012 5:32 AM
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RIM is more like a lottery ticket, HP is more of a disgusting cigar
butt, but at a very attractive price for that one last puff.


Cigar butt is too harsh.
My point about that whole neighbourhood analogy is that they have a lot of different businesses (houses/butts).
Some are quite valuable, some less so, and management is working
diligently to make sure the value of all of them erodes steadily.
Still, what if they screw that up and one of the business units accidentally succeeds?
RIM is more all-or-nothing. They don't have any other product lines.

Weird trading in HPQ yesterday.
It flatlined at spot on $12 for hours, popping a pinch above sometimes but never below.
I find this is usually the sign of a BIG buyer or seller with a limit order.
Frequently the company itself. Check out an intraday chart.

Jim

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Author: DrtThrwingMonkey Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12924 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/22/2012 8:15 AM
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Weird trading in HPQ yesterday.
It flatlined at spot on $12 for hours, popping a pinch above sometimes but never below.
I find this is usually the sign of a BIG buyer or seller with a limit order.
Frequently the company itself. Check out an intraday chart.



I noticed that, but didn't think of your deduction which seems logical.

Sorry to call it a disgusting cigar butt. But at some point, even a disgusting cigar butt acquires appeal. Different from RIM, HP is not likely to go bankrupt, although I wonder how many more cockroaches they are going to find in this kitchen. Maybe some kind of sandwich option trade (I'm not familiar with the technical term, but staying in the kitchen...), like buying shares and selling some ITM calls?

dtm

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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12925 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/22/2012 11:59 AM
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Maybe some kind of sandwich option trade (I'm not familiar with the technical
term, but staying in the kitchen...), like buying shares and selling some ITM calls?


There are zillions of ways to slice the option approach, but they all
first come down to whether or not you want to put money at risk for long exposure.
It's not the best investment out there, for sure.
It's so cheap I'm happy at the token position size, because I believe
that a portfolio of a large number of similar small positions would
do very well on average through time if they're uncorrelated.
But I wouldn't recommend it to anybody.

No doubt analyst estimates are plummeting like a stone right now.
$1.95 seems a popular choice for the "earnings 2013" pool, for P/E of 6.1x.
Rather remarkably, if you exclude the write-downs and "unusual items" the year just ended came in at $4.05.
But really neither figure is very important—it's 2014 and thereafter that matter more.

Jim

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Author: CM001 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12926 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/22/2012 12:52 PM
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war with Dell for 3Par (Dell wisely backed away) under the
previous CEO

I thought 3par deal was done by board just before the new CEO arrived.

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Author: DrtThrwingMonkey Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12929 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/22/2012 6:03 PM
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There are zillions of ways to slice the option approach, but they all
first come down to whether or not you want to put money at risk for long exposure.
It's not the best investment out there, for sure.
It's so cheap I'm happy at the token position size, because I believe
that a portfolio of a large number of similar small positions would
do very well on average through time if they're uncorrelated.



Yeah, that makes a lot of sense.

My thinking is just that I don't really have any faith in current management, nor much hope that current management will become former management. So I don't like the upside of a straight share investment very much. But awful as they are, I don't think that even they will succeed in killing the company. It is still profitable, it has real assets, and real profits, as soon as they stop shooting themselves in the foot, which they might well eventually do, or someone might force them to. If that's right, then the shares won't go down very much more.

So I guess I am convincing myself to sell puts, or buy shares and sell covered calls, if the price is ok.

For instance, if I wouldn't want to buy the shares at prices much higher than today's, say $15, but don't think the shares are likely to drop much further, then I could buy shares for $12, and sell (covered) $15 calls for $1.75, so I have $10.25 at risk. If the shares go down to $6, then I will have been wrong, but I lose $4.25 instead of $6 with a straight share purchase, return of -$4.25/$10.25=-41%. If the shares stagnate as I think they will, then I have a 2-year non-annualized return of $1.75/$10.25=17%. If the shares go up to $20, then I will have been overly pessimistic, but I will still make the first $3 on the shares, plus my $1.75 premium, so $4.75/$10.25=46%.

But just going on intuition, the $1.75 premium seems a bit low for losing the upside beyond $15, and I might as well keep things simple and just buy a few shares, strictly gambling of course, with a high probability of loss but a pretty reasonable expected return.

dtm

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Author: knighttof3 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12944 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 11/29/2012 12:30 AM
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DELL, for reasons mentioned by Araroot.
Turn-around stories are always risky, but Dell's existing financials are not too terrible at current stock price. Attractive on both counts - good management and good financials (ignoring the small matter of a terminal decline in business...)

HPQ doesn't smell right. No concept of returning money to shareholders.

Buying RIMM is like betting on 0 in roulette. Not for me, personally. I am too busy buying Nokia :-)

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Author: CM001 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12975 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 12/1/2012 2:46 PM
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HPQ doesn't smell right. No concept of returning money to shareholders.

They are paying dividend and in the recent past have done share buybacks. So why are you saying no concept of returning money to shareholders?

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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12978 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 12/2/2012 7:10 AM
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HPQ doesn't smell right. No concept of returning money to shareholders.
...
They are paying dividend and in the recent past have done share buybacks.
So why are you saying no concept of returning money to shareholders?


Perhaps he might better have said "no concept of being good stewards of the money of shareholders".
Yes, of the profits they made, they do pay out dividends and have done buybacks.
But those profits are just end residue from the far more important job of capital allocation, at which they suck.
Think how much MORE they could pay out in dividends or buybacks if they
hadn't blown so many billions on such scarily overpriced acquisitions.

Jim

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Author: CM001 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12979 of 14303
Subject: Re: OT: Which FKA Would You Choose? Date: 12/2/2012 11:04 AM
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Perhaps he might better have said "no concept of being good stewards of the money of shareholders".

Agreed. I think the bigger challenge is they lack vision, a consistent philosophy, consistent leadership.

The capital allocation is terrible. They had done pretty bad deals. IT will take many, many years to recover. No doubt.

I think, on this, Oracle is not getting enough credit. They have become a company of serial acquirers and have done a good job with that so far.

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