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Technology Stocks : Compaq
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To: Elwood P. Dowd who wrote (79100)3/4/2000 4:14:00 PM
From: Salah Mohamed  Read Replies (1) of 97611
 
El ... About Q1

>>>I'll say this much, if they like CPQ well enough to drive the stock up over a point on the news that they may miss earnings by 25%, they ARE REALLY GONNNA LIKE the stock if CPQ makes or exceeds earnings in Q1!<<<

Let's get the story about Q1 straight. In the CC, MC said the following:

1. He is comfortable with the estimates for FY00 ($1.06 -$1.08) but no mention of Q1 estimates. Further, he emphasized that these estimates exclude investment gains and charges.

2. About Q1
- We started the quarter slow.
- Revenues for Q1 will be less than Q4 due to seasonality.
- Q1 will be back-end loaded due to W2K release date.
- Q1 will have $60M - $75M additional costs for NT on Alpha (note that this charge will reduce the EPS by about 3 cents).

Now, DLJ's estimate of 12 cents would be about the same as other analysts if he subtracted the 3 cents without adding an expected 3 cents from investment gains. IMO, the consensus estimate of 16 cents assumes that the additional costs of NT on Alpha will be balanced by investment gains of about the same amount.

Here are some quotes from a transcript of the CC:

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compaq.com

First, we expect revenue to decrease quarter to quarter because of seasonality. The first quarter will be a little more back-end loaded than usual due to the release of Windows 2000 in mid-February.

We told you last quarter that our decision to end development of Windows NT on Alpha would have an impact of $50 to $100 million dollars during the fourth quarter. Because of the complexity of this program and our sensitivity to meeting customer needs, it has taken longer than we expected to execute this program. We now expect to book $60 to $75 million dollars in costs associated with this program during the current quarter.

Our expectations for Q1 are somewhat conservative, but I feel good about the year ahead . . .
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