Obewon: I don't think the class-action suits are important enough to cause COMPAQ to adjust in any way. But it is important for COMPAQ to counter the wave of skepticism since Credit Suisse First Boston reported Mason's comments in late February, as a "warning". The minimum COMPAQ must do is meet current expectations of 32 cents; better still it should meet the original expectations, before the "phantom warning", of 35 cents. For emphasis it should exceed 35.
COMPAQ has it within it power to do this with the $2.9 million of tax credits it has to deploy. Tax credits taken means tax monies not paid to the government, so there is good reason to take them now anyway. If, in the event, the underlying operations would have produced earnings of only 29-31 cents, before tax credits, it will be seized upon by all those who want to prove that they were right. But let the dogs bark and the procession move on.
The headline figure and the real net earnings, including tax credits, are more important.
Incidentally, as part of this process, COMPAQ will also have deflated the class-actions. (Remember, COMPAQ never made any forecast about 1Q earnings, so it cannot be "wrong" or "misleading" - the downward adjustment in estimates and, perhaps, in actual operational results, was from the analysts forecasts, not Compaq's. COMPAQ had said it was comfortable with analysts forecasts and if its net EPS comes in at or near 35 cents, it will have been proven right). |
