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Technology Stocks : Compaq
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To: Ted Foster who wrote (78516)2/19/2000 1:21:00 AM
From: rudedog  Read Replies (2) of 97611
 
Ted -
Add to that the impact of iPaq and HP's ePC (now re-named to e-something else...) CPQ claimed at their win2K launch that they are selling at a billion dollar run rate - that is 2 million iPaqs. At $500... DELL's commercial desktop ASP is currently more than $1600. DELL will have no choice but to follow CPQ and HP in the commercial space or risk losing business and market share in a segment that represents nearly 80% of their revenune base. At current run rates, CPQ will have iPaq as 20% of its commercial units. If DELL does the same thing, it will reduce their commercial desktop revenues by about 15%. Net margins for desktops would face additional pressure since iPaq is a 4% net, and there is little likelihood that DELL could do much better...

So in addition to the other pressures DELL faces, it must grow revenue and margin in the high end to compensate for that shift. This may be the reason that DELL said in their last earnings announcement that revenue and earnings growth would be under pressure for the rest of the year, and so may already be comprehended in DELL's reduced expectations. But looking at the earnings projections DELL has provided, the last 2 quarters of the year show a sharp increase in both revenue and earnings growth. I think the crystal ball is more accurate on the near term - a forecast of 8% reveune growth and flat earnings for 1Q - than for the 42% revenue and earnings growth in 4Q...
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