Mighty Compaq, Killer of Portfolios..........FYI
April's Fools
April 13, 1999 /// Upside Online
by Aaron Bunnell
Foolish?: Sometimes even Eckhard Pfeiffer can't meet his goals. Historically, Compaq has hit lofty target after lofty target during its transformation from a mere powerhouse to a diversified, far-reaching superpower. But after the company blindsided analysts April 9 with its Q1 profit warning, CEO Pfeiffer's pledge to hit $50 billion in annual revenues in 1999 is in jeopardy. Needless to say, also in jeopardy is Pfeiffer's head, which shareholders must want stuffed and mounted.
What it Lost: Investor confidence. Not only was Compaq downgraded by every analysts under the sun, it's stock price fell below its level during the correction of early October 1998. Since that time, other major tech stocks--even Dell--are up anywhere from 20 percent to 120 percent. Analysts are so down on Compaq, in fact, they don't think the company's warning is indicative of a broader slowdown in PC sales. That sends a message to Compaq: it's not the PC market, it's your company.
What We Gain: Drama. What we've got is a company in a state of limbo. Its move to direct selling has its traditional sales channels infuriated. Margins on PC sales are so thin, Compaq actually loses money on some of its machines in order to retain its fledgling market share. It faces an uphill battle against IBM and others in the Web services arena. And speaking of the Web, Compaq is getting a late start with its e-commerce sites and AltaVista remains a second-tier portal.
The Verdict: A little drama, however, will make for a better story should Compaq get back on track. Now expected to post $9.6 billion in revenues in the first quarter, a couple of earnings surprises in the coming year could easily put Compaq back in favor on the market. At prices around $24.50 Tuesday morning, half-priced from where they started 1999, some classic "buy low" philosophy could pay off in spades. One thing's for sure, with new areas to conquer and old areas to regain, Pfeiffer & Co. have their work cut out for them.
Aaron Bunnell is Director, Internet Development, at UPSIDE. |
