THREAD - I REMEMBER SOME COMMENTS FROM MASON ABOUT FACTORING OR WAS IT CALL NOT TELLING THE TRUTH RECENTLY ?Compaq Puts 1Q Net At Breakeven
HOUSTON (Dow Jones)--Compaq Computer Corp. (CPQ) warned it expects to report a break-even first quarter on flat sales, reflecting price cuts as the company fought for market share in the highly competitive North American commercial sector.
The disclosure by the nation's leading personal computer maker, made after the close of the market Friday, marked the third successive day that a leader in the technology sector warned that its first quarter earnings would disappoint Wall Street. Chipmaking juggernaut Intel Corp. (INTC) warned Wednesday and telecommunications behemoth Motorola Inc. (MOT) followed suit Thursday.
The PC seller said its outlook for the second quarter remains "cautious" as well, as market conditions remain "competitive." Nonetheless, Compaq said it "fully intends" to expand its business and add market share in 1998.
Compaq said it cut prices and boosted promotional efforts once it became clear that sales in the North American commercial channels weren't meeting expectations. The company said the "aggressive" price cuts and promotional activity would continue throught the first and second quarter as Compaq moves to slash channel inventories and accelerate the implementation of its optimized distribution model.
Compaq said it seeks to achieve channel inventories that support that distribution model by the end of the second quarter. The company said timing its pricing and promotional actions to coincide with the closing of its acquisition of Digital Equipment Corp. (DEC) "will position us to take full advantage of that merger."
Wall Street analysts said on the heels of Intel's profit warning Wednesday that it appeared the Santa Clara, Calif., chipmaker had been caught off guard by an unforeseen buildup in computer inventories. Aaron Goldberg, an analyst at La Jolla, Calif., market researcher Computer Intelligence Corp., said data shows computer inventories at U.S. distributors rose significantly in October and again in January, the latest month for which data are available.
Compaq shares weren't hammered along with other leading tech stocks Thursday in the selloff prompted by the Intel forecast, falling 87.5 cents to close at $27.125, and they rose 50 cents Friday to close at $27.625 ahead of Compaq's profit warning. (Intel shares dropped 13% Thursday and rival PC maker Dell 5% before bouncing back Friday.) But the shares have nonetheless lost about 20% of their value in the last two weeks from their mid-February level of $35 even as the overall market has risen slightly.
A First Call Inc. survey of 32 analysts showed a consensus earnings estimate of 35 cents a share for Compaq's first quarter and 38 cents for the second. The company earned 27 cents a share in its year-ago first quarter and 30 cents in the year-ago second period.
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