WSJ, March 14, 2001, Analysts Cut Profit Estimates for Compaq; Firm Says Its Outlook Remains Unchanged
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By GARY MCWILLIAMS
Staff Reporter of THE WALL STREET JOURNAL
Wall Street analysts are paring their first-quarter earnings projections for Compaq Computer Corp., one of a few big tech companies that has not recently lowered its expectations.
Amid worries that the U.S. computer-spending slowdown has spread to Compaq's key markets, analysts appear to be embracing a consensus profit of about 17 cents a diluted share, compared with a prior consensus of 20 cents a share, according to Charles R. Hill, research director at First Call/Thomson Financial. Current estimates range from a high of 22 cents to as low as 15 cents a share.
Tuesday, a Compaq spokesman said the company hadn't altered its outlook. In January, Chief Executive Michael D. Capellas said the Houston computer maker was expecting a profit of 21 cents a share on sales of $9.5 billion. A year ago, it earned 16 cents a diluted share on sales of $9.51 billion in the first quarter. Compaq is expected to release results on April 24.
Compaq Posts Big Loss, Cuts Outlook, but Inventory Levels Buoy Stock Price (Jan. 24)
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Company Profile: Compaq Computer
In January, Mr. Capellas pegged Compaq's outlook on continued gains in server-computers and data-storage products as well as healthy international sales. Since then, server and storage rivals Sun Microsystems Inc. and EMC Corp. have lowered their forecasts, and chip maker Intel Corp. has sharply cut its outlook.
"Everything [Compaq is] in is under pressure," said Bear Stearns & Co. analyst Andrew J. Neff, who in late February pared his profit estimate for Compaq to 17 cents a share on revenue of $9.5 billion. Mr. Neff also sliced his full-year estimate to 75 cents a share from $1.15 and lowered his sales projection to $40.4 billion, down $5.2 billion from a prior estimate.
Since Mr. Neff lowered his outlook, analysts at J.P. Morgan Chase's JP Morgan H&Q, Salomon Smith Barney Inc., Robertson, Stephens Inc., Wit SoundView Corp. and Lehman Brothers have followed suit.
Mark Specker, analyst at Wit SoundView, lowered his first-quarter Compaq estimate to 18 cents a share from 21 cents and cut his quarterly sales forecast to $9.25 billion from $9.6 billion. "The hard thing is knowing how far down is down," he said. Mr. Specker added that he believes European markets "slowed down appreciably in the month of February." He said that in light of Intel's warning of weaker server-computer sales, Compaq's server sales and margins would be lower than he forecast. "That's Compaq's principal source of profit," said Mr. Specker, noting that as firms pare spending on computers, they are more apt to trim servers.
He also lowered his estimate for the year to profit of $1.08 a share, compared with a prior estimate of $1.22 a share.
In 4 p.m. composite trading Tuesday on the New York Stock Exchange, Compaq was up 43 cents to $18.38. Its 52-week high is $35.
Write to Gary McWilliams at gary.mcwilliams@wsj.com |
