Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Elwood P. Dowd who wrote (77103)	1/29/2000 4:11:00 PM
From: Andreas	Read Replies (1) \| Respond to of 97611

Elwood - the Yahoo poster should consider this; Lets not forget that in 1997 when sales were well below what they are now, cpq made more than 1.08 per share. The 1.00+ will be met by (i) continued cost cutting, (ii) 15% increase in revenues, (iii) a return to margin growth (margins have been dropping in last year), etc. etc. The answer, in a nutshell, is to reverse the factors which caused profits to drop on comparable sales. The single biggest factor is the increase in cost of goods sold as a percent of sales resulting from retail prices dropping faster than component costs. Retail prices appear to be stabilizing. If component costs can continue to drop and cpq can maintain retail prices, that will go a long way to solving the problem. In addition, new product introductions such as the ipaq are designed to increase market share - should be good margins on the ipaq. Low cost product with high margins which should generate increase in pc share. Finally, I would point out that in 97 G&A costs were 3.7 billion and in 98 those costs increased to 6.3 billion!!! That is a major, major part of the problem - which is also easy to fix. Take the differential (2.6) and figure out what that amounts to on a per share basis. A ton!!

To: Elwood P. Dowd who wrote (77103)	1/29/2000 9:01:00 PM
From: Salah Mohamed	Respond to of 97611

El ... About FY00 Estimates >>>rude and/or anyone interested in responding... the following is from the Zoo... >>>CPQ is supposed to earn over $1.00 per share this year. Now, for this 4th qtr, they earned .16 (.19 minus .3, which were from investments). Where are these revenues going to come from qtr after qtr? If they earned .16 this past Xmas--always their best earnings season--they have to average about .25 per quarter or 50% better than this past Xmas for each quarter of 2000.<<< Another person replies saying that >>>Y2K lockdown $$$, IPAQ, WIN 2000, WildFire, direct sales, stealing share from GTW and DELL, layoffs and other cost cutting, and new internet efforts and products should do the job.<<< Any thoughts???<<< The only thing we can do is to take the guidance they gave to the analysts and translate it into numbers and hopefully they blow out these numbers. In the analysts meeting, MC gave the company projections as follows: compaq.com Revenue Growth = 15% Gross Margin = 1.5%+ improvement OpEx = Continued sequential improvement (4% Y/Y) My take on these numbers is that they will improve the Operating Margin (OpM) by about 5.5% Y/Y (1.5%+4%), and conservatively 1.3% Q/Q sequentially. Looking at Q4-99 numbers Revenue = $10.478B Operating Income including Investment Income = $435M Investment Income = $78M Operating Income (OpI) = 435 -78 = $357M OpM = 357/10478 = 3.4% Considering FY99 quarterly revenues ($9.4B, $9.4B, $9.2B, and $10.5B for Q1 through Q4, respectively), Q1-00 revenue will be lower than Q4-99, 15% revenue growth for FY00, and sequential improvement in the OpM of 1.3% Q/Q, here are my estimates for FY00 (assuming tax rate of 33% and 1.73B shares): Q Revenue, $B OpM% OpI, $M Net Income, $M EPS, Cent Q1 10.1 4.7 475 318 18 Q2 10.6 6.0 636 426 25 Q3 11.1 7.3 810 543 31 Q4 12.4 8.6 1066 714 41 Totals: Revenue = $44.2B, Rev. Growth = (44.2/38.5) - 1 = 14.8%, EPS = $1.15 Just to satisfy Victor and everyone who thinks that they cann't make the 15% rev. growth, I repeated the calcualtions assuming 10%-11% rev. growth. Q Revenue, $B OpM% OpI, $M Net Income, $M EPS, Cent Q1 9.7 4.7 456 305 18 Q2 10.2 6.0 612 410 24 Q3 10.7 7.3 781 523 30 Q4 12.0 8.6 1032 691 40 Totals: Revenue = $42.6B, Rev. Growth = (42.6/38.5) - 1 = 10.7%, EPS = $1.12 It is clear from the above that revenue growth is not that critical in meeting the EPS estimates, they sink or float depending on the OpM. Obviously, MC knows this and that is why he is comfortable with the EPS estimates for FY00 with 10% rev. growth. The things the guy in the Zoo talked about are correct. Here is how they affect each quarter: Q1 Reduced PC consumer sales (less sales) Lockdown for Y2K and 2/29 (same sales as Q4) Shipping of iPaq and EZ2000 (more sales) Shipping of Win2000 (more sales) Some reduction in manpower (less OpEx) Q2 Completion of Inacom aquisition (increased direct sales) Completion of Layoffs (less OpEx) Q3 Shipping of Wildfire (more sales) Q4 Increased PC consumer sales (more sales)