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Technology Stocks : Compaq
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To: Andreas who wrote (57081)4/12/1999 1:39:00 AM
From: E_K_S  Read Replies (1) of 97611
 
Hi Andreas - Didn't COMPAQ purchase a few Internet related companies for all cash during the previous quarter. I believe these companies will be consolidated into the new AltaVista product. Do you think a large portion of these costs were expensed this quarter (ie. one time charge) which may have accounted for lower overall margins.

I believe also it was stated that some very large DEC related orders were anticipated to be booked this quarter but never materialized. They will probably will hit next quarter. These are higher end products with higher margins.

Finally, the overall industry probably softened and to maintain market share end-unit prices were dropped and again margins suffered.

My focus will be on the growth in Service revenues. I bet that this component of revenues did not grow as fast as estimated. It was mentioned on this thread that COMPAQ's goal was to generate 50% of their future revenues from high end servers and service revenues. These two type of revenue streams will generate the highest margins, and in fact differentiate COMPAQ from all the other box makers in the future (especially Dell).

Maybe our management needs to look at a restructuring that provides our company a fast track to building their high end products and service consulting/maintenance business at the expense of their low end PC box business model. Perhaps this quarter reflects this on-going transition and once their (1) online PC build to order system and (2) JIT (Just-In-Time) manufacturing facilities are in place, their PC inventory management will be optimized and these obsolete inventory write downs will be behind us.

Just some additional items to consider. COMPAQ's overall "new" business model needs to be laid out by our management (in detail!) so we (and Wall Street analysts) can track their performance based on specific key revenue (ie. by Service revenues and Enterprise Customer revenues) and manufacturing (ie. new facility inventory JIT management measurements) objectives.

IMO, management still has a lot left to explain to this investor regarding how they plan to eventually structure the "new consolidated CPQ" company including the make up of these new revenue streams and exactly what is left to be completed.

EKS
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