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Technology Stocks : Compaq
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To: John Koligman who wrote (18264)2/26/1998 8:27:00 PM
From: Maverick  Read Replies (3) of 97611
 
COMPAQ COMPUTER CORP. (CPQ) 32 15/16 -1 1/16. In very active trading, shares of
computer maker and services provider trade lower following a ratings downgrade from Salomon
Smith Barney. Analyst Richard Gardner cut its rating on the stock from "outperform" to
"neutral" due to concerns over "too much inventory in the sales distribution channel."
According to Mr. Gardner, he feels that Compaq has begun to negotiate with distributors to carry
additional inventory even though the channel is already above five weeks. Because of this
inventory build-up, he thinks that Compaq remains at a cost disadvantage to Dell Computer
(DELL 130 1/8 +3/16) and Hewlett-Packard (HWP 65 1/16 +7/16) and does not see an
improvement in this situation until inventory levels decline from above five weeks to 15 days. To
be sure, the downgrade news has not been well received by market participants as the stock had
already lost some momentum before today's ratings cut after trading near the $37 mark earlier
this month following the decision to acquire Digital Equipment Corp. (DEC 58 1/2 -1 5/16) for
$9.6 billion in cash and stock. Subsequently, management admitted that it saw a "tough and
challenging" period in 1998 from the Asia Pacific region due to the problems ailing those
particular economies. Accordingly, management does not expects growth from the Asian region
to match last year's expansion, which reflects and is consistent with the downgrade the stock
received today due to its perceived inventory problems. By Briefing.com.
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