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Technology Stocks : Compaq
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To: marquis103 who wrote (69973)10/25/1999 9:03:00 PM
From: E_K_S  Read Replies (4) of 97611
 
Russ - If true... that would indicate $0.5764/share BEFORE the one time charges for layoffs. Assume that revenues remain flat and the cost cutting continues, then CPQ may indeed earn $2.30/share next year. One could then value CPQ at less than 10x's next year earnings w/ little or no expected growth.

Now assume that specific industry segments like Internet servers & Services, Telecommunication, E-Commerce, Internet appliances their storage divisions can show the street double digit growth; CPQ's stock could justify a $35.00-$40.00 price or higher. Management must show Wall Street where the new growth is going to come from, describe the business plan as to how they will achieve this new growth, and finally execute with consecutive positive quarterly results.

The questions that remain to be answered include (1) are there any more "one time charges" looking forward, (2) are these niche market segments significant "new" revenue sources to get CPQ's earnings back on a multi-year sustainable & predictable basis, and (3) has management re-structured the manufacturing divisions and corresponding SG&A "enough" to continue to provide key (Fortune 1000) enterprise accounts superior customer service with sufficient capacity to handle new (double digit) growth for the future?

The $900 million one time charge sounds high to me but may well reflect the turning point for this company if true. The conference call will be very important to the institutional holders (and new investors) as it should provide the street a clearer vision on these new revenues streams and how they will eventually impact next years earnings.

EKS
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