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To: MeDroogies who wrote (11719)	9/14/1999 10:29:00 AM
From: Paul van Wijk	Read Replies (1) \| Respond to of 19079

MeDroogies, 1. You're good. 2. Agree with you on Steve Jobs & Apple. Bought their shares recently. 3. Can you be more specific on the Digital-statement. 4. Agree, they will turn-around in the long run. But both Apple & IBM needed a lot of time. 5. I'm also bullish on IBM. Paul

To: MeDroogies who wrote (11719)	9/14/1999 10:42:00 AM
From: Paul van Wijk	Read Replies (1) \| Respond to of 19079

About turn-arounds Compaq's Breakout Is Far From Certain By Eric Moskowitz Senior Writer 9/8/99 7:00 AM ET Investors who disagree on when to get back into Compaq (CPQ:NYSE) -- some say now, some say never -- might find clues in the turnarounds of three reclamation projects in the technology world. In recent years, Apple (AAPL:Nasdaq), IBM (IBM:NYSE) and Hewlett-Packard (HWP:NYSE) have staged comebacks, sometimes against daunting odds. Each offers signs as to what path the Houston, Texas-based PC seller should take in its own turnaround project. Compaq's stock, which was trading above 50 in January, closed at 22 15/16 on Tuesday. Every turnaround venture needs five things, according to Bear Stearns analyst Andrew Neff: Cash, an installed base, differentiation from competitors, strong management and management incentives. Compaq, which has the cash and installed base, lacks differentiation and some key management, and doesn't show clear management incentives. The company may find it helpful to look at what its three peers did to turn things from hopeless to hopeful. Apple lacked the management and management incentive to succeed until it found Steve Jobs, whose own love for the company was a key incentive. "Steve is 100% of the reason why Apple turned things around," says Harvey Baraban, a longtime Apple watcher who teaches courses at San Francisco's Golden Gate University on technical analysis. Baraban is long Apple shares. IBM lacked differentiation until it figured out its technology and its global reach were its chief assets by refocusing on business services and R&D. And H-P thought it needed new management when in fact all it seemingly needed was a savvy marketing plan. H-P's recently hatched E-Services marketing initiative will bring in $7 billion in revenue in the year through October, or 14% of this year's total revenue, according to Credit Suisse First Boston. Compaq needs to strengthen its weak points because its strong points are starting to weaken. Compaq had a healthy $3 billion in cash at the end of June, but that figure is down from $4.1 billion at the end of 1998 thanks to its bulging contra-revenue account. And Compaq's installed base has been slowly eroding as customers drift off to more vibrant companies such as Dell (DELL:Nasdaq) and Sun Microsystems (SUNW:Nasdaq). So it's doubly important for Compaq to work on differentiation and management. Compaq is struggling to find a new CFO to replace interim CFO Ben Wells. Many point to the accounting practices of former CFO Earl Mason that put Compaq in a financial hole. Until Compaq hires a new CFO, it will have that much more trouble getting the Street's respect back. Mason didn't return calls seeking comment. To see the importance of a good CFO in a turnaround, look at Apple's CFO Fred Anderson, whom many credit for helping to bring a harmonious earnings environment. "He's not flashy, but he's good," Neff says. Since joining Apple in 1996, Anderson has won a reputation for giving clear guidance to Wall Street. He's also helped keep Apple in the black since the December 1997 quarter. (Bear Stearns has a buy on Apple and has done no underwriting for the company.) Compaq has strengthened management with new CEO Michael Capellas, who is intent on lowering head count. Capellas has told the Street that Compaq will not be profitable for the rest of the year, thereby lowering expectations. Capellas declined to be interviewed for this story. That leaves differentiation. Unlike Apple, IBM and H-P, Compaq has yet to rediscover a strong niche in which to build its brand. It had the portal AltaVista -- perhaps the most valuable jewel of its $9.6 billion DEC acquisition from 1998 -- but lacking an Internet vision of its own, it sold a majority stake in it to CMGI (CMGI:Nasdaq) in July. "Like H-P and like IBM, Compaq is going to have to find that one word or one brand that can resonate in a customer's mind," says Steve Milunovich, head of Merrill Lynch's Technology Group. So a turnaround may be a while in coming. "I think we are at least two or three quarters away from a boom in that stock," says Milunovich, who has a neutral rating on Compaq, an accumulate on H-P, and a buy on IBM. Merrill has done recent underwriting for IBM, but not for Compaq or H-P. Money managers also aren't expecting Compaq to break out of the low-20s band it's been in since its springtime blowup. "We don't buy on a turnaround because it never comes when management or investors think it's going to come," says Lenny Schuster, a money manager at Gemina Capital, who has no Compaq position. "But Compaq's too big to be finished, so I think it's only a matter of time." Compaq seems to realize the changes it needs to make -- a new CFO with a record of consistent earnings growth, a new marketing initiative that the Street seems to think has promise and a means to shore up Compaq's brand name. But until it institutes these initiatives, investors will continue to shy away from this PC heavyweight.