Digital Witnesses Mixed Trend

The Digital Equipment share price hogged the limelight last week on the bourses on news of acquisition of Digital Equipment Corporation by Compaq Computers Corporation at global levels.

The scrip hit the circuit filter mark on the Bombay Stock Exchange (BSE) on Tuesday, the day the acquisition was announced, to close at Rs 147, gaining Rs 12 over the previous weeks close of Rs 137, while on the National Stock Exchange (NSE) the scrip closed at Rs 147, a gain of Rs 8.

The rise in share price could not be maintained later on the week. The scrip closed last week at Rs 131, down by Rs 5 over the previous weeks close. On the NSE the stock closed at Rs 131, down by Rs 7.

 

Digital Equipment Corporation, the parent company of Digital Equipment (India), holds a 51 per cent stake in the company, with Hinditron holding around six per cent. The rest is been held by foreign institutional investors and the public. Digital India is unique in being the only listed Digital company outside.

Following the takeover of Digital Equipment Corporation in the US, Digital Equipment (India) will now be the subsidiary of Compaq as it would automatically acquire 51 per cent stake in Digital Equipment (India).

The takeover is likely to help both the companies as Compaqs strength lies in personal computers and desktops. It is the largest personal computers vendor in the country while Digitals strength lies in enterprise service business.

In India, beside having access to enterprise service, Digital Equipment (India)s manufacturing capacity and its software centre would to be an added advantage for Compaq.

According to a software analyst with a leading FII, the reason for a drop in the share price of Digital Equipment following the acquisition by Compaq was due to below-expectation results from the company. The sales and net profit of the company increased marginally.

On an equity of 32.73 crore, according to the unaudited results of the company for the six months ended December 27, the net profit stood at Rs 10.97 crore (Rs 9.38 crore) while sales stood at Rs 139.85 crore (Rs 124.14 crore).

Further, it is still unclear about the status of shareholders of Digital Equipment (since one is a listed company while the other is unlisted). Until then there wont be any chance for an immediate price appreciation in the scrip. Anyway, the stock cant move down much from the present level, he added.