Sorry thread, lots of cr*ppy news.
Compaq Seen Having Trouble Meeting 1st-Qtr
Estimates (Update1)
Bloomberg News
March 12, 1999, 1:54 p.m. PT
Compaq Seen Having Trouble Meeting 1st-Qtr Estimates (Update1)
(Adds closing stock price.)
Houston, March 12 (Bloomberg) -- Compaq Computer Corp., the
world's No. 1 personal computer maker, will have trouble meeting
first-quarter profit estimates because of sluggish sales,
analysts and investors said.
Current expectations are for earnings of 33 cents a share
for the quarter that ends March 31, according to First Call Corp.
To meet that estimate, Compaq must sell a lot of machines in the
next few weeks to make up for slower-than-expected January sales,
analysts said.
''It's a nail-biter,'' analyst Gillian Munson of Morgan
Stanley Dean Witter said in a report. She lowered her first-
quarter estimate to 31 cents from 35 cents. ''February results
are mostly in and, while they were improved over January, there
was not unexpected upside.''
Expectations for strong PC demand abounded at the beginning
of the year as many thought that corporations would buy more
computers to prepare for the turn of the century, when older
machines may incorrectly identify the year 2000 as 1900.
Now, Compaq and others have cautioned that demand was
sluggish in the first part of the quarter. Companies including
Ingram Micro Inc., the world's largest wholesale distributor of
PCs, already have warned of disappointing earnings.
Compaq's shares have fallen 41 percent since Jan. 27, when
they traded as high as 51 1/4. The stock was unchanged at 30 1/4
today.
''I can't imagine that Compaq will outperform,'' said
analyst Lou Mazzucchelli of Gerard Klauer Mattison, who has a
''hold'' rating on the stock.
Hitting the Numbers
Compaq's revenue could come in as low as $9.6 billion, less
than forecasts of as much as $9.98 billion, analysts said. Sales
in the year-earlier first quarter were $5.69 billion. That
doesn't include Digital Equipment Corp., which Compaq acquired in
June. Digital's 1998 first-quarter sales were $2.96 billion.
Compaq cautioned last month that sales to some corporate
customers slowed in January, but that they were picking up. The
company declined to comment on orders for March.
''We have said the quarter is back-end loaded,'' said
spokesman Jim Finlaw of Houston-based Compaq, meaning that more
sales are expected in the latter part of the three-month period.
Compaq could meet expectations if March is unusually strong,
or if it manages expenses to cope with slower sales, analysts
said.
''They will do what it takes to hit the numbers,'' said
David Stremba, analyst at Dataquest Inc. Dataquest expects PC
demand to start picking up in April.
Inventory
One concern among analysts is Compaq's inventory of PCs held
by its distributors, the companies that sell machines to
corporations and retailers.
In January, there were 32 day's worth of PCs waiting to be
sold, or 4.5 weeks of inventory. That's slightly higher than at
the end of December, when Compaq said its inventory was at 3.9
weeks. It's also above Compaq's goal of less than four week's
worth of unsold machines.
''They are going to have trouble getting rid of product for
a while,'' said portfolio manager Duane Eatherly of Banc One
Investment Advisers, which owns a million shares of Compaq.
Most analysts said it's unlikely that Compaq will try to
force its distributors to take more machines than they can
handle. Still, to move the PCs on dealers' shelves, Compaq may
have to cut prices. Computer dealers said they expect Compaq to
reduce prices on some desktop models on Monday.
Compaq isn't the only PC-related company that's seen slower
sales.
3Com Corp., a maker of networking equipment including modems
and cards used in personal computers, warned that earnings will
be below expectations because of lackluster PC sales growth. No.
3 direct PC seller Micron Electronics Inc. also cautioned about
profit.
No. 1 computer-chip maker Intel Corp., whose processors are
in 75 percent of PCs sold, has said its sales will fall from the
fourth quarter's and gross margin will narrow.
And Oracle Corp., the biggest database software maker,
reported slower-than-expected sales as companies put off buying
while they address the Year 2000 issue.
--Molly Williams in San Francisco (415) 912-2993, with reporting |
