Shakeup at Compaq Stands to Move Money Back Into Tech
By Justin Lahart
Senior Writer
4/19/99 9:19 AM ET
Remember last Monday when the sky was going to fall? When Compaq's (CPQ:NYSE) ill-timed earnings warning was going to lay Wall Street low?
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It didn't, of course. There was an opening dip, and then stocks chugged higher. True, tech shares suffered later in the week, as did other growth issues, but this had as much to do with the move into cyclical stocks and a broadening of the market that pulled money out of the stocks that, for more than a year, have really been the only game in town.
Now there's the news that Compaq CEO Eckhardt Pfeiffer and CFO Earl Mason are out. For many Compaq investors, the management shakeup is a long time coming -- the top PC maker's stock has languished over the last two years, and its whining about how there was an industrywide slowdown, while its competitors said there wasn't, suggested a company in denial.
The question for Wall Street this morning is if the Compaq news is asymmetrical. Investors didn't think the company's trouble augured all that badly for tech at large, but does the suggestion that it's finally working to deal with its problems help bring money back into tech?
"Psychologically, it could provide the impetus for people to move in," said Todd Clark, head of listed trading at Charles Schwab, but generally he feels that the goings on at Compaq are really "a company-specific thing."
Still, it looks to Clark that tech may have found its bottom. He's been closely watching the Morgan Stanley High Tech index, which bounced off 1000 Thursday -- an important support level. "As long as they can hold 1000 on a closing basis, you can make the case that it's a better time to buy tech now than it was a couple of weeks ago," he said.
If techs can come back, that would be tremendously bullish. Technical analysts love the move into cyclicals and the broadening of the market, but they would like to see tech hold. That, they say, would make for a pretty terrific second quarter.
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