This one is for my favourite munchkin - jim kelley!
April 12, 1999
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Compaq: Channel Inventories Flat In 1Q From 4Q
Dow Jones Newswires
By Christop
NEW YORK -- Compaq Computer Corp. (CPQ) Chief Executive Eckhard Pfeiffer said the company's profit shortfall in the first quarter was due to industry conditions, not problems within the company.
In a conference call, Pfeiffer said demand for business PCs wasn't as high in the first quarter as the company had originally forecast. But he tried to play down concerns that the company has lost its competitive focus as it integrates Digital Equipment Corp., which Compaq bought last year for more than $9 billion.
"We announced last June that the Digital integration was scheduled over four quarters, and the largest part was behind us at the end of last year," he said.
The company held a quick conference call Monday morning to discuss the profit warning issued late Friday. Compaq said it would likely earn 15 cents a share in the March-ending period on sales of $9.4 billion. That's 17 cents a share and as much as $400 million lower than some estimates.
Compaq will officially report results April 21.
The Digital integration is "on schedule," he said, and no other restructuring is planned.
Another concern among Wall Street analysts is Compaq's relationship with computer resellers, known as the "channel" in the industry. The concern is that Compaq has alienated some channel partners as it moves to selling computers directly to customers.
But Pfeiffer said those concerns are overdone.
"Contrary to (analysts') statements, the . . . program overall is very positive," he said.
Pfeiffer said Compaq wasn't "pointing a finger" at International Business Machines Corp. (IBM) for inflaming a price war. Instead, he said pricing pressure appeared to be "industrywide."
Another concern in the market has been the level of inventory being held in the channel. In 1998, unsold inventory sat unsold in the channel, creating a price war that hurt Compaq and many of its competitors.
But Chief Financial Officer Earl Mason said in the conference call that "channel inventories were about flat" in the first quarter from the fourth.
Compaq shares were recently down 6 15/16, or 22.4%, to 24. Volume was enormous, with more than 60 million shares trading hands before noon.
- Christopher Grimes; (201) 938-5253
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