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CPQ: COMPAQ AT PSI'S HIGH TECH CONFERENCE THIS MORNING
04:10pm EST 10-Nov-97 Prudential Securities (D.YOUNG)
R E S E A R C H N O T E S November 10, 1997
Subject: Compaq Computer (CPQ--$64 1/4--NYSE)
AAPL CPQ DELL GATE IBM HWP DEC OPINION
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Ind. Div.: -- Yield: -- Shares: 693 mil. 52-Wk.Range: 79 9/16 - 25 1/4
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EPS FY Year P/E 1Q 2Q 3Q 4Q
Actual 12/95 $ 1.51 43.7X $ 0.32 $ 0.36 $ 0.36 $ 0.47
Actual 12/96 $ 1.89 34.9X $ 0.34 $ 0.39 $ 0.50 $ 0.66
Current 12/97 $ 2.67E 24.1X $ 0.55A $ 0.59A $ 0.71A $ 0.82E
Current 12/98 $ 3.20E 20.1X
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* This morning, Compaq made a presentation at Prudential Securities' High Tech
Conference. The company's outlook was bullish.
* Ron Schrock, VP of the Presario division, indicated that October was another
record month, and the company is increasing fourth quarter output in both the
consumer and enterprise computing (servers and workstations) groups.
* Mr. Schrock noted that Compaq is on target to reduce channel inventory to two
to three weeks by year end, from four weeks at the end of September.
* The presentation also did much to dispell the myth of low profitability in
the consumer segment. Mr. Schrock explained that Compaq's consumer division has
a return on invested capital (ROIC) in the triple digits - the highest of any
of the company's businesses.
* Furthermore, Schrock pointed out that Compaq's $999 PC maintains gross
margins greater than the average for the consumer division. He added that the
consumer business runs at inventory turns of 100x.
* Compaq's rapid growth in the consumer sector first became a stand-out when
third quarter results were announced. But while the common perception is that
consumer PC divisions of any PC manufacturer are low-margin businesses, Mr.
Schrock re-asssured us today that Compaq's consumer division is highly
profitable. His comments on October's activity, including heightened production
of both consumer and enterprise offerings, provide a bullish outlook for the
fourth quarter. |
