Prudential Update 4/15
EQUITY RESEARCH
COMPAQ COMPUTER
APRIL 15, 1999
--------------------------------------------------------------------------------
CPQ: HIGHLIGHTS FROM INNOVATE '99 AND ANALYST MEETING
Subject: Compaq Computer (CPQ-$23 11/16)--NYSE COMPUT COM EPS OPINION
Current: STRONG BUYAnalysts: Kimberly Alexy (212) 778-1049 Prior: Ellen Chae (212)
778-1751 Risk: HIGH 12-Month Target Price:
$49.00--------------------------------------------------------------------------------Ind. Div.: $0.01 Yield:
0.20% Shares: 1,675 mil. 52-Wk.Range:
51-22--------------------------------------------------------------------------------EPS FY Year P/E 1Q 2Q
3Q 4Q Actual 12/98 $ 0.47 $0.01 $0.02 $0.07 $0.38 Current 12/99 $ 1.40E 17.2X $0.15E
$0.34E $0.39E $0.51E Current 12/00 $ 1.95E 12.3X
--------------------------------------------------------------------------------o On April 13-14, we attended
Compaq's Innovate '99 Forum in Houston, Texas - a large annual forum for global
customers designed to showcase company products and discuss new technologies and
strategies. o During the keynote address, CEO Eckhart Pfeiffer introduced a new
strategic initiative for the company called "Non-Stop eBusiness Solutions." Through this
initiative, Compaq is striving to become a strategic partner with its customers, rather
than purely a hardware supplier, by providing network integration, operations
management, and IT infrastructure. o Yesterday, we attended a related Compaq
investor/analyst meeting at Innovate hosted by Eckhart Pfeiffer and Earl Mason, the
company's CEO and CFO, respectively. At the meeting, Compaq was more candid than
usual, providing additional insight into the quarter's miss. o Management noted that of
the $600MM top-line miss vs. original expectations of $10B, 50% was due to industry
pressures, while the remainder was company-specific. o We believe that with the broader
macro demand improving, pricing pressures should alleviate from the very aggressive Q1
levels. We expect earnings expectations to be more formally re-calibrated after next
week's conference call (on 4/21), but believe the shares remain attractively valued at
current levels. Potential catalysts include improved visibility into Q2 demand and pricing
trends, which we expect will improve
Posted: 04/16/99, 8:31AM EDT as a reply to: Msg 68903 by dogtrainer_99
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