H-P, Sun Micro fade with downgrades
By Cecily Fraser, CBS MarketWatch
Last Update: 2:05 PM ET Jun 1, 1999
Movers & Shakers
Earnings Headlines
NEW YORK (CBS.MW) -- Shares of Hewlett-Packard and Sun
Microsystems fell Tuesday after Banc of America Securities sliced the
companies' ratings to "hold" from "buy" amid signs of sluggish demand in
1999's fourth quarter and 2000's first quarter.
During afternoon trading, Hewlett-Packard (HWP:
news, msgs) shares gave back 3 1/2 to 90 3/4, while
Sun Microsystems' (SUNW: news, msgs) stock
dropped 2 11/16 to 57 1/16.
Analyst Kurt King said that, based on a survey of
corporate and public-sector computer buyers
conducted by the firm, he expects to sees a spending
fall-off due to year-2000 issues.
"Our data support the idea (that) the current demand
environment is being helped by Y2K pull-ins," the
analyst reported in a research note.
During the past month, King said the firm surveyed 50
information technology executives at a cross section
of U.S.-based organizations. About half of those
surveyed said they plan to reduce hardware spending
in the 1999 fourth quarter.
"While the spending hit will be nonrecurring, it still represents a looming
negative surprise as Street estimates tend to assume normal seasonality in
the quarter surrounding the rollover," King said.
That said, King lowered earnings estimates for most of the computer group,
saying that cuts "vary according to each stock's customer and product mix."
The analyst said he
expects
Hewlett-Packard to
earn 91 cents a share
during the first quarter
of fiscal 2000. He said
he sees Sun Micro
posting a
second-quarter profit of
30 cents, down from
the Wall Street
consensus of 39 cents.
"If we're right about a year-end spending fall-off, it's hard to see how Sun will
deliver the roughly 15 percent year-over-year revenue growth called for in the
December quarter in most analysts' models," the analyst said.
King said that, if anything, Y2K will serve to boost hardware demand in the
second and third quarter of 1999.
The analyst maintained "buy" ratings on Dell Computer (DELL: news, msgs),
Compaq (CPQ: news, msgs) and Tech Data (TECD: news, msgs) but did
decrease his fourth-quarter earnings estimates. King cuts Dell's target to 18
cents a share from 22 cents, Compaq to 35 cents from 43 cents and Tech
Data to 76 cents from 81 cents.
|
