Re:<<Given the anecdotal evidence I've picked up on 2nd Q sales in Pc's and servers I believe that CPQ will beat consensus estimates.>>
******************************************
Top Stories: Compaq Hints at a Second-Quarter Loss
By Eric Moskowitz
Staff Reporter
6/3/98 12:38 PM ET
Compaq Computer (CPQ:NYSE), struggling with bloated inventories, is hinting that it could report a second-quarter loss.
In a closed-door breakout session today at the PaineWebber Growth & Technology conference, Earl Mason, the personal computer maker's chief financial officer, indicated that Compaq is headed toward a money-losing quarter, according to two people who attended the session. Analysts currently expect the company to earn a penny a share in the period, according to First Call.
(Both money managers who attended the meeting asked to remain anonymous. One is short Compaq and the other doesn't have a position in the stock.)
The loss would follow a poor first quarter in which Compaq earned just $16 million, or 1 cent a share. For its year-ago second quarter ended June 30, 1997, Compaq earned $422 million, or $1.48 a share, before charges, on sales of $5.01 billion. Year-ago per-share figures don't reflect at 2-for-1 stock split that took effect in January.
Compaq shares were up 11/16 at midday Wednesday at 28 1/8.
Compaq's problems stem from the fact that declining demand has left it with fat inventories. The distribution channel is so full that one reseller, CompuCom Systems (CMPC:Nasdaq), said in a separate presentation that it has stopped buying from Compaq for now. The declining demand also comes at time when PC sales are traditionally slow.
In addition, PC prices are plummeting. Ed Anderson, CompuCom's president and CEO, said prices at CompuCom plunged 22% in May after falling 18% during the March quarter. And he doesn't expect near-term improvement.
Compaq itself has contributed to this environment. Earlier this year it said it would "immediately reduce prices and aggressively promote commercial products in North America in order to reduce channel inventories." And in the company's first-quarter earnings release, Mason said, "It will take another quarter of adjustment to put the company's core business on a track of improved profitability."
In the midst of this environment Compaq is trying to flush its bloated inventory channel, a tough proposition at best.
But Compaq apparently wanted to limit the information. It was likely the only company at the conference at New York's Grand Hyatt to close its regular presentation to reporters. Then the company closed its breakout session as well, which is a more common practice.
Mason said, however, that Compaq expects an improved second half once the inventory channel clears, according to people in the meeting. Compaq also expects a boost from the introduction of Microsoft's (MSFT:Nasdaq) Windows 98 later this month.
A Compaq spokesman wasn't immediately available for comment.
|
