Stocks to watch Wednesday
Compaq bulks up in direct selling, Budget
cuts jobs as PowerCerv goes more Linux
January 04, 2000: 6:43 p.m. ET
NEW YORK (CNNfn) - Compaq beat a wider path toward the hot
market for direct sales of computers, highlighting Tuesday's
after-hours action, while auto-renter Budget said it plans to cut
about 1,000 jobs.
Compaq Computer
Embattled personal-computer vendor Compaq Computer
(CPQ) unveiled plans to bulk up in the direct-selling business,
agreeing to purchase order-management and other systems from
Inacom (ICO) for about $370 million in cash.
"This purchase makes great strategic sense for Compaq
because it gives us the right capabilities quickly and
cost-effectively,” said Michael Capellas, Compaq president and
chief executive officer.
"We'll be better equipped to meet the diverse and changing
needs of our U.S. customers - particularly our major accounts
which clearly want to go direct - increasing our potential for
growth," added Capellas.
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Compaq said it would use the new assets to run a separately
managed subsidiary, reporting to Mike Winkler, Compaq's general
manager of commercial personal computing.
As part of the arrangement, Compaq entered in to a services,
supply, and sales agreement with Inacom, a leading reseller of
PCs.
Budget Group
Auto-rental company Budget Group (BD) announced it will take
an pre-tax charge of $90 million to $95 million in its fourth
quarter to pay for a wide restructuring by which it will quit the
car-sales business, sell non-core assets and consolidate its Ryder
TRS headquarter and field operations.
Budget said it would cut about 1,000 jobs outside of its
customer service operation. The moves, Budget said, are part of
plans to reduce overhead and other expenses by an estimated
$100 million a year.
Budget said, however, it expects fourth-quarter operating
income, before the pre-tax charge, to be in line with analysts'
consensus forecasts. Analysts polled by First Call Corp. expect
Budget to post a loss of 45 cents per share in the fourth quarter.
"Our focus is on increasing pre-tax margins and returns on
capital in our core car and truck rental operations," said Sandy
Miller, Budget Group CEO and chairman.
DAMARK International
Shopping club and catalog retailer DAMARK International
(DMRK) announced it expects its fourth-quarter earnings to top
analysts' consensus forecasts on strength in its membership
business.
The company has been working to reduce its dependence on
the catalog business, which is expected to face lower growth rates
than Damark's membership-driven services.
"Overall, our fourth-quarter financial performance should be
outstanding despite disappointing results from our catalog
operations," said Mark Cohn, CEO and chairman at Damark,
adding, "our membership business continues to perform well
ahead of plan and we have successfully eliminated our
dependence on our catalog segment for membership growth.”
DAMARK provides a host of functions for top retailers, such as
order and payment processing services, inventory receipt and
warehousing, among other things.
Click here for an after-hours quote
PowerCerv
And getting a dose of market magic related to the Linux
operating system was PowerCerv (PCRV), up 3-5/8 to 9-38 after
hours. The software maker said it would support Linux in its
upcoming release of its ERP Plus software suite for businesses.
In a statement, Mike Simmons, PowerCerv's president, said:
"With the increasing popularity of Linux, we felt that we should
invest some of our development assets into this future market."
"The costs associated with Linux might make it attractive to
certain portions of the mid-market,” he added.
With stock and bond markets already volatile in 2000, investors
are likely to keep close watch on economic data that could
influence Federal Reserve policy on short-term interest rates.
On tap for Wednesday is a report on November factory orders.
According to a poll by briefing.com, economists are expecting a
rise of 0.9 percent from a decline of 0.2 percent in October.
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