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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Elwood P. Dowd who wrote (69465)	10/22/1999 9:37:00 AM
From: rupert1	Read Replies (3) \| Respond to of 97611

El; Thanks I am posting his comments below: Yahoo Zoo by: sikorskys76 103146 of 103147 Dan Niles, the most influential tech sector analyst, has blasted INTEL, DELL, and IBM recently -- prior to the company's warnings. Because of his tendency to be a Cassandra analyst, looking for problems at companies, versus a Polyanna analyst who analyizes companies through rose-tinted glasses, I would have expected him to blast Compaq ahead of their earnings. However, he has been inclined to reserve his comments. This is due to the fact that the sweep of Compaq's prior TOP management has left the Wall Street analyst community with no corporate insiders who they can attempt to massage inside information from. The new management team at Compaq has been excruciatingly scrupulous in keeping an arm's length distance from the Wall Street community. This can be attributed to the fact that they wish to walk-the-walk before they can talk-the-talk. Having seen the share price trading at 52 week lows, new management clearly understands that credibility comes from substance not the appearance of substance. Look to Tuesday's earnings release to deliver on their committment to return Compaq to profitability. Although the lack of analyst guidance and news vacum has punished the stock, I would expect that this is a bear-trap as Compaq continues to grow market share and retain supremacy as the #1 PC maker and provider of services. Cost cutting is the key to the "turnaround" at Compaq. Apple Computers TWO years ago saw both its market share declining along with their profits. They addressed both issues and the stock has rebounded strongly. Compaq's problems are not nearly as troublesome as Apple's was, making the stock price appear to reflect a gloomier scenario for the company's fundamentals than what the economic realities dictate. Look for a trade above 20 prior to the earnings on Tuesday, with a 10-15% gap HIGHER to the 22-24 level on favorable earnings results. Should Compaq give a "all-clears" signal to analysts in forward guidance -- another 10-20% gain can be expected ON TOP of the 22-24 level. (or 26) All in all, with IBM on Friday morning expected to rebound 5-7% from its lows, Compaq by comparison could trade on Friday up to 20 per share -- setting up for a move to 26 within ONE WEEK (predicated on positive earnings and analyst upgrades on the back of them)

To: Elwood P. Dowd who wrote (69465)	10/22/1999 10:02:00 AM
From: rupert1	Read Replies (3) \| Respond to of 97611

Moe from the ZOO COMPAQ PROFITS not Sales Growth by: sikorskys76 103130 of 103160 Compaq computers earnings release on Tuesday, October 26, 1999 will be a pivotal moment in the company's history. It marks the second turnaround in this company's otherwise illustrious record. Dan Niles, a promininent BankBoston research analyst, calls for fair (not great) news from Compaq. (See: cnetinvestor.com ) Niles is probably the hottest analyst there is in the technology sector. He earlier this year remarked that he saw problems at INTEL, DELL, and IBM -- all of which later where confirmed to be true by the companies. Niles, based in San Francisco, has a remarkable level of access to industry insiders. What is remarkable about this, however, is that he has nobody inside Compaq who he can tap for inside information -- as has been the case with the other companies. This can be explained by the dismissal of ALL of top management last quarter -- replaced with new recruits who are disinclined to talk their hand versus laying their cars out on the table come the earnings report. Although Compaq isn't expected to have great growth rates, but fair growth rates, the emphasis of next Tuesday's earnings release will be on PROFITABILITY not sales growth. Compaq maintains quarterly sales of $9-10 BILLION, second only to IBM with quarterly sales of $20 BILLION. IBM disappointed analyst, in part, because earlier this year they boasted to being able to grow @ 15%, when in the most recent release, their hardware sales grew @ 5%, and are forecast to decline next TWO quarters. Nonetheless, IBM had profits of 90 CENTS, and in 4Q1999 are forecast to have profits of $1 per share. Compaq is forecast to have profits of 5 CENTS a share. With $9 BILLION in quarterly sales Compaq should have greater profitability. Just as AT&T axed tens of thousands of jobs, boosting profits in excess of 15%, while having a modest 6% sales growth, Compaq should be able to boost profits by sharply cutting costs -- resulting in improved margins. Compaq @ 2% of $9 BILLION in sales, should be able to earn $180 MILLION or 10 CENTS per share in earnings -- double the expected profitability forecast for 3Q1999 of 5 CENTS a share. Consequently, although Dan Niles is right NOT to EXPECT high sales growth rates from Compaq next week, where he is incorrect is in his focus on growth rates versus profitability. Absent CONTRACTING or DECLINING sales, Compaq's problems haven't been in being the lowest cost MANUFACTURER -- but rather -- with regard to expenses associated with depreciating values for INVENTORY which they were stuck with when their distributers were unable to sell them into the marketplace. Their deals with their distributors called for a price protection which allowed the distributors to return unsold computer hardware to Compaq or receive payment for the difference in value between what they paid Compaq and the sales markdowns required to move slow selling inventory off their shelves. The distribution channel now stands @ 4 -- from 46. AND, the new deals Compaq has with their distributors puts the risk of selling all their inventory squarely on the shoulders of the distributors and NOT Compaq -- a recipe for guarenteed profits. Profitability at Compaq is more than CERTAIN -- it's a guarentee. With a 12,000 reduction in head count -- INCLUDING the dismissal of ALL the executives responsible for this year's profit warning BOMBS, from Eckhard Pfeiffer (at ground zero) to the VP of Human Resources (the bomb radius), Compaq no longer will be paying for an executive team who in the case of Pfeiffer is walking away with $300 million in severance pay and stock, were VERY HIGHLY paid yet produced mediocre results. Their departure alone will cut Compaq's costs in excess of $50 MILLION per year.