Hi Victor,
With reference to Kumar and privileged information possibly gleaned
on the QT, have a look at this note. I have highlighted the relevant
section:
CPQ: Another Exec Is Out; Expect Management's New Plan in Next Several Days
10:29pm EDT 16-Jun-99 BofA Montgomery (K. King)
o SVP of Human Resources resigns -- another member of the old guard is gone.
o Continue to expect announcement of the new plan developed under the
Chairman's interim team in the next several days.
o Think in the near term it's more likely we'll see a big restructuring
charge -- which could be viewed as positive -- than a big inventory write-
down -- which could be viewed as negative.
o Maintain BUY on our continued optimism about the longer-term outlook and
the market's low expectations for the near term.
After the close today Compaq (CPQ, BUY, $22) announced the retirement of
Hans Gutsch, its SVP of Human Resources. As Gutsch's retirement begins
immediately it appears this was another in a series of forced resignations
under Chairman Ben Rosen's interim management team. This isn't a surprising
move as Gutsch was viewed by insiders as an entrenched member of the "old
guard" under Eckhard Pfeiffer, Compaq's ex-CEO.
As we discussed last Friday, we expect that in the next several days
Rosen's team will come forward with a new plan that includes the first longer-
term financial guidance the Street has received since January. We believe near-
term guidance could include substantial restructuring charges intended to lower
Compaq's expense base going forward, which investors could view as a net
positive. Despite recent speculation, we haven't seen evidence of a need for a
substantial inventory write-down, which, in contrast to a restructuring charge,
investors could view as negative as it would point to continued execution foul-
ups and provide no forward benefit.
We maintain our BUY on Compaq. The near term outlook is uncertain because
the company went quiet with Wall Street eight weeks ago, at the time the
interim management team stepped in. Still, we remain optimistic in the longer
term about Compaq's enterprise computing and services strategy and think
execution risk should diminish as changes under new management take hold.
With 1998 revenues of $31 billion, Compaq is the worldwide market leader
in PC's. Headquartered in Houston, TX, the company has manufacturing in the
U.S., Scotland, China, and Brazil. Compaq's revenue split by geography for
1998 is estimated at 54% North America, 32% Europe, 6% Asia Pacific, 4% Latin
America, and 4% Japan. Pro forma 1998 revenues for Compaq and Digital
Equipment Corporation (acquired in June 1998) combined were $36.5 billion,
making Compaq the world's second largest computer company.
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