Sorry if already posted ... Compaq Shares Fall on Concern About 1st-Qtr Revenue (Update6) (Updates with closing stock prices.)
Houston, Feb. 26 (Bloomberg) -- Shares of Compaq Computer Corp., the world's largest personal-computer maker, plunged 14 percent on concern that first-quarter profit and revenue won't meet forecasts after sales slowed in January.
Compaq fell 5 11/16 to 35 5/16, its biggest single-day drop in almost three years. The decline dragged down Intel Corp., Micron Technology Inc. and other computer-related companies. More than 74 million Compaq shares changed hands, making it the most active in U.S. markets.
The PC maker said January sales to small corporate customers were weaker than expected after many U.S. businesses bought new computers last year. A slowdown at Compaq hurts No. 1 computer- chip maker Intel, because Compaq is one of its biggest customers. ''If one of the big guys is weak, then everybody's weak,'' said Mark Specker, an analyst with SoundView Technology Group in San Francisco, who rates Compaq a ''buy.''
PC stocks already were buffeted by weaker-than-expected sales growth from Compaq rival Dell Computer Corp., which last week reported its slowest revenue growth in two years.
Dell, which touched a high of 110 before its fiscal fourth- quarter earnings report, fell 1 5/8 to 80 1/8 today.
Intel slid 7 13/16 to 119 15/16, the largest drop since Aug. 31. The company's biggest rival in the microprocessor market, Advanced Micro Devices Inc., last month sold more chips than Intel in the U.S. retail PC market, according to a market- research group.
The results are the first time that Intel lost the leading position in retail PC sales, according to PC Data, a Reston, Virginia-based company that tracks the sales.
Cuts
Word of the slowdown at Compaq prompted a round of cuts in sales and earnings forecasts for the Houston-based company.
Analyst Steven Milunovich of Merrill Lynch & Co. dropped his first-quarter sales forecast to $9.8 billion from $10.1 billion, and Don Young at PaineWebber Inc. cut his rating on the shares to ''neutral'' from ''buy.'' ''The PC business hit the doldrums in January,'' said Eugene Kiang, president of computer maker Boldata Systems in Fremont, California, who said his own business slumped last month.
This isn't the first rough period for Compaq. Its profit plummeted 96 percent in the first quarter of 1998 to just a penny a share after it slashed prices to clean out leftover PCs.
No one is predicting such a decline this year. The average estimate for first-quarter earnings is 35 cents a share, based on estimates gathered by First Call Corp.
Credit Suisse First Boston analyst Michael Kwatinetz cut his profit estimate to 30 cents a share from 35 after he and a group of the firm's clients met with Compaq Chief Executive Eckhard Pfeiffer and Chief Financial Officer Earl Mason yesterday.
In responding to a question from the Kwatinetz, Mason told the group ''that the whole industry saw some softness in January, and that included Compaq,'' Compaq spokesman Jim Finlaw said.
Rout
One of the biggest losers in today's technology rout was Boise, Idaho-based Micron, among the world's largest makers of memory chips. Its shares fell 8 13/16 to 58.
The shares rallied in the last few months amid signs that memory chip prices had stabilized after a long slump. Any weakness in the PC market would drive chip prices lower again. ''Compaq calls into question the strength of the computer market place,'' said John Geraghty, an analyst at Gerard Klauer Mattison.
Compaq's sales were strong in the consumer, services and high-end corporate markets, Finlaw said. The dip in January sales was limited only to small business clients in North America and Europe. Those sales appear to be rebounding this month, he said. ''We're talking about a one-month blip in demand that may alter the numbers for the quarter,'' said Cody Acree, an analyst at Southwest Securities Inc. in Dallas, who rates Compaq ''buy.''
Some PC customers also may have delayed new computer purchases until Intel introduced its Pentium III microprocessor. Machines with the new chip hit stores today. ''Whenever Intel launches a major product, the market pauses,'' said Jim Chen, an analyst for Roger Engemann & Associates in Pasadena, California, which owns 2.7 million Compaq shares. |
