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

To: PCSS who wrote (71460)	11/10/1999 4:49:00 PM
From: Captain Jack	Read Replies (1) \| Respond to of 97611

Michael-- <<"Compaq CEO Says October PC Sales `Normal,'">> THE GOOD <<"`You still have the unknown of what's going to happen in December,'">> THE BAD (maybe) <<"Capellas said in one of his first interviews since taking charge at the world's No. 1 personal computer maker in July.">> THE UGLY!

To: PCSS who wrote (71460)	11/10/1999 8:30:00 PM
From: hlpinout	Respond to of 97611

Michael, The full article and most recent update. -- Compaq Says October PC Sales 'Normal,' Unveils iPaq (Update5) 11/10/99 1:28:00 PM Source: Bloomberg News (Updates with closing stock price.) New York, Nov. 10 (Bloomberg) -- Compaq Computer Corp.'s October sales ''looked very normal'' although questions linger about whether Year 2000 concerns will slow PC buying in the final weeks of the quarter, Chief Executive Michael Capellas said. ''You still have the unknown of what's going to happen in December,'' Capellas said in one of his first interviews since taking charge at the world's No. 1 personal computer maker in July. ''I still don't believe the market knows what it's going to do. The order book continues to be very strong.'' Capellas' comments came as Compaq unveiled a $499 device designed to hook business customers to the Internet. The machine, called iPaq, will go on sale early next year as Compaq targets what it sees as corporate demand for simplified computers to revive its sales and earnings. ''It's the right product at the right time,'' said Andrew Neff, an analyst with Bear Stearns & Co. ''The key question is can they execute and get the product to the customer.'' The iPaq is smaller than a traditional personal computer and designed to last longer. It uses Microsoft Corp.'s Windows operating system and comes with a CD-ROM, DVD drive or floppy disk drive. Compaq rose 1 1/8 to 21 7/8 in trading of 35.9 million shares, making it the fourth most-active U.S. stock. Testing Ground IPaq could become the testing ground for Compaq's turnaround strategy, Neff and other analysts said. The iPaq comes in only four models. They feature an Intel Corp. Pentium III microprocessor or a Celeron chip, and come with or without external serial and parallel ports. Those few choices may mean Compaq plans to limit the number of models it will sell to reduce manufacturing costs, said Richard Gardner, an analyst with Salomon Smith Barney who has a ''neutral'' rating on Compaq. ''The bad news is it also means (average selling prices) will continue to fall,'' he said. Apple Computer Inc., which competes with Compaq, unveiled a similar strategy under interim Chief Executive Steve Jobs when it eliminated products and streamlined its line to four main models. Apple's iMac consumer machines are one part of that strategy. Apple spokeswoman Rhona Hamilton said the company had no immediate comment on the similarity in the iMac and iPaq names. Houston-based Compaq is accepting iPaq orders over the Internet and plans to begin shipping the machine in mid-January for U.S. customers. It will be available worldwide by March. The iPaq follows a similar announcement Monday by Hewlett- Packard Co., the No. 2 computer maker. Hewlett-Packard will begin selling an Internet device, called the e-PC, in the first half. Dell Computer Corp., the biggest direct-seller of PCs, is scheduled to unveil an Internet device, the WebPC, on Nov. 30. Compaq estimates that 15 percent to 20 percent of its current corporate customers will buy the iPaq. That number is expected to rise to 50 percent to 60 percent in three years, said Michael Winkler, Compaq's senior vice president for commercial PC products. Happy Holidays? Compaq is trying to boost sales and profit after several quarters of disappointing earnings sent its share price plunging 48 percent this year. The company had a loss in the second quarter and earnings that were little changed in the third. Analysts expect profit of 16 cents for the fourth quarter, the average estimate from First Call Corp. In the year-earlier period, net income was 43 cents. Compaq faces minor shortages of some parts, Capellas said, though it's managed to avoid big problems with memory chips. Availability of memory chips was crimped by an earthquake in Taiwan in September, and Compaq warned retailers that they might have trouble getting some of the PCs they requested for the holiday season because of supply shortages. Competition Compaq is struggling to compete with rivals such as Dell that sell PCs directly to customers. Compaq sells most of its PCs through retailers and distributors, though most iPaq sales will be direct, Capellas said. While it also will sell the device through distributors, Compaq will ship the iPaq directly to the customer and pay a commission to the reseller, Winkler said. The distribution method is designed to prevent inventory gluts that have hurt Compaq's earnings in the past. Compaq angered distributors last year when it unveiled plans to sell its Prosignia line directly via the Internet. Winkler, however, said most resellers support the iPaq plan. ''By and large, the Compaq model is to go to an inventory- less model whenever we can do that,'' Winkler said. Capellas took over after his predecessor, Eckhard Pfeiffer, was ousted by Compaq's board in April. Since then, he's tried to clarify the company's strategy, focusing on the Internet as a method for boosting sales of products and services. ''Our real goal is that when you think of the Internet, you think of Compaq,'' he said.