Andreas ... About Consumer PC's
>>>O.K all you defenders of this management on this thread. Have you read the article by Joe Wilcox, staff writer for CNET News? HP kicks CPQ's butt! Real flattering! CPQ is losing the battle.<<<
Yes, I read the article but I'm not concerned. CPQ's market share has been between 30% to 35% over the last five months or so and HP was the leader in at least one month during this period. Also, the article didn't tell us anything credible about CPQ failures, they mentioned the 5% sales from kiosks which have been there for a long time (nothing new here), and the RW CD-ROM which CPQ provides. The remark that CPQ got a black eye in one of their bright spots is just pure hype. Yes, MC said several times that their consumer biz is on fire, but the fact of the matter is that this biz is a very low margin biz and they make very little money from it. Let's look at the last two quarters numbers:
Q3
Total Revenues = 9.4B
Consumer PC Group (CPCG) Revenues = 1.5B
Operating Income from CPCG = 65M
Unallocated Shared Expenses = 325M
CPCG share of the above expenses = 325 x 1 .5 / 9.4 = 52M
Net Operating Income from CPCG = 65 - 52 = 13M
Operating Margin (OpM) = 13M / 1.5B = 0.9%
Q4
Total Revenues = 10.4B
Consumer PC Group (CPCG) Revenues = 2B
Operating Income from CPCG = 69M
Unallocated Shared Expenses = 268M
CPCG share of the above expenses = 268 x 2 / 10.4 = 52M
Net Operating Income from CPCG = 69 - 52 = 17M
OpM = 17M / 2B = 0.9%
Above data are obtained from:
www1.compaq.com!ob~17850_1_1,00.html
www1.compaq.com!ob~24370_1_1,00.html
I don't consider ~1.0% operating margin a bright spot, maybe it is bright relative to the Commercial PC's which has a negative operating margin. Their target for OpM for CPCG is 4.5% which translates to 3% profit margin. In summary, the CPCG contribution to the EPS is currently less than 1.0 cent and the impact on Q1 results would be negligible even if they improved the OpM to 2%. They make most of their money from the ESSG.
About MC
>>>I think it was Salah or someone who works at cpq who was quick to point out that MC has done a great job turning around morale.<<<
Yes, I said that MC is doing a great job and I'm sticking with it, but I've never talked about morale. Let me be very clear, I don't work for CPQ, and I don't even know anybody who works for CPQ, I'm just a shareholder.
Now, back to MC ..... I'm convinced that he is doing a great job based on what he said and what others said about him, and based on the improvement in the financial results over the last two quarters. The attacks on MC in this thread are not justified, it is solely based on the
stock price fluctuations, when the stock is above $30, no attacks, when the stock is around $25, everyone takes a shot at him. In fact, after I said MC is doing a great job, two independent IT Research outfits (Gartner & Forrester) said more or less the same thing. The main point here is this company is turning around but it is not going to happen overnight, it will take time. In the latest CC, MC clearly said that the turnaround won't be completed before some time in 2001. If one doesn't believe him or thinks he can't do it, or thinks the turnaround is slow, or can't take the stock price fluctuations, I suggest selling, shorting, or finding greener pastures. Again, here are the Gartner and Forrester articles:
Gartner
yahoo.cnet.com
Forrester
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