And a positive comment from an unknown from DLJ,,, not much to look fwd to tomorrow,,,
HOUSTON, Jan 25 (Reuters) - Compaq Computer Corp. <CPQ.N>
on Tuesday said fourth-quarter net income fell 56 percent to
$332 million, in line with lowered expectations, as the world's
largest personal computer maker closed out a trying year.
Net income fell to $332 million, or 19 cents per diluted
share, from $758 million, or 43 cents, in the year-earlier
quarter.
The decline in profits occurred as Compaq struggled to
rebound from plunging PC prices, a management house-cleaning
and the difficult time it has had in integrating several major
acquisitions over the past two years.
The computer maker said fourth-quarter results benefited
from an after-tax gain of $50 million on its portfolio of
investments in other companies, which appeared to boost
reported earnings by 15 percent, or nearly 3 cents per share.
Excluding the gains, the results were in line with the
consensus of 16 cents per share among analysts surveyed by
First Call/Thomson Financial.
Revenues fell 4 percent to $10.5 billion, as the effect of
translating foreign currency into U.S. dollars trimmed results
by 3 percentage points.
Following the report, which came after the regular trading
session, Compaq shares fell to 31 in composite U.S. stock
market trading, off 2 points from Monday's close. The stock had
closed at 32-9/16 on the New York Stock Exchange.
Compaq President and Chief Executive Michael Capellas, who
replaced former CEO Eckhard Pfeiffer after he was forced out
earlier this year, said the company's revenues would grow
roughly 15 percent in 2000 from $38.5 billion it generated in
1999.
Even so, he cautioned first-quarter revenue would decline
compared with fourth quarter, the company's strongest season,
when holiday sales of personal computers to consumers boomed.
"The first quarter will start out a little bit slow,"
Capellas told financial analysts in a conference call that
came after the financial report. "We expect revenue to decline
quarter-to-quarter due to seasonality."
"(Our) view of Q1 (first quarter) is somewhat conservative
but we're confident of the year ahead," Capellas said, adding
that he was comfortable with analysts' estimates at about $1.08
per share for 2000, the First Call survey consensus.
Kevin McCarthy, an analyst with brokerage Donaldson, Lufkin
& Jenrette, said the results were in line with expectations and
suggested the worst of Compaq's troubles were behind it. Over
time, the stock could trade nearly 50 percent higher, he said.
"Near-term, the stock has no reason to go below 30 and will
eventually go to 45," McCarthy said of firming interest in the
shares among investors, many of whom see the company as the
most undervalued among major-name technology stocks.
Sales of servers, the computers used to manage networks of
other computers, accounted for 51 percent of total revenue and
totaled $5.3 billion, down 3 percent from a year ago, Compaq
said.
However, that represented a 8 percent increase from 1999's
third quarter. The segment, which generates most of Compaq's
profits, realized operating income of $714 million, off 17
percent on the year.
Compaq was hardest hit in the category for which it is
perhaps best known -- commercial PCs -- where revenues amounted
to $3.1 billion, down 19 percent from a year earlier, but up 15
percent from the third quarter.
The company has been playing catch up here against
archrival Dell Computer Corp. <DELL.O>, the leading supplier of
PCs through direct distribution outlets such as telephone, and
increasingly the Internet.
Dell's booming business led it to surpass Compaq for the
No. 1 spot in combined U.S. business and consumer PC shipments
during the second half of 1999, although Compaq retained a
commanding lead worldwide, according to industry market data.
The unit, which accounts for 30 percent of total revenue,
posted a fourth-quarter loss of $79 million, improving from an
even steeper third-quarter loss of $169 million -- but a
reversal from the $157 million profit in fourth quarter 1998.
The consumer PC business remained a bright spot, as the
unit reported record revenue of $2 billion, up 24 percent from
the year-earlier period and up 34 percent from the third
quarter.
Importantly for the future, the company said its push to
derive a greater percentage of its revenue from items other
than PC themselves -- such as software, peripheral products and
Internet access -- was working, with growth at 50 percent.
Compaq benefited from the exit of rival PC makers from the
U.S. retail market, including International Business Machines
Corp. <IBM.N> and Packard Bell NEC Inc., a division of Japan's
giant NEC Corp. <6701.T><NIPNY.O>.
((-- Eric Auchard, New York newsdesk, 212-859-1840))
REUTERS
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