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

To: Elwood P. Dowd who wrote (77397)	2/2/2000 11:26:00 PM
From: Andreas	Read Replies (2) \| Respond to of 97611

Jubak's Journal; I usually don't agree with this guy - his track record is a joke. But here is a portion of a recent article as it relates to cpq. Take it for what it is worth - not much, in my view. "I think the reaction to Compaq's earnings announcement is even more telling. Whereas Wall Street analysts decided to hedge their bets with Qualcomm, they delivered a rather stark message to Compaq: "We don't believe you." Think about it. Here's a company with a great name, an amazing customer list and solid technology badly in need of a turnaround. And what does management deliver? The first signs of exactly that change in fortune. Instead of declining from the previous quarter, revenue and earnings both rose. A lot of work remains to be done, but Compaq's management painted a picture of continued progress for 2000. Revenue this year will grow by 10% to 12%, and could even reach 15% -- triple the anemic 5% revenue growth Compaq delivered in 1999. So why didn't the stock soar? Stocks are supposed to trade on expectations, right? Because analysts focused on all the problems that haven't been fixed yet, and on the possibility that they couldn't be fixed -- at least not by current management. In the days after Compaq reported, I read analyst reports that focused on the continuing problem posed by the company's two-tier distribution system -- the company's mix of 30% direct and 70% retail just can't compete on costs with Dell's 100% direct model. The enterprise and services business that Compaq so expensively acquired when it bought Digital Equipment saw a 3% drop in sales in the quarter. And Compaq continues to lose share in the server market to Sun Microsystems (SUNW) and Dell. The company had set the bar for 2000 at 10% to 12% growth -- and even hinted at 15% -- and, given the dimensions of the company's problems, Wall Street decided that was just too high. Now it's up to you to decide Wall Street isn't necessarily right about all this, of course. Dell could miss even that 30% growth rate. Or if it delivers that number, a significant group of investors who remember the old, 50% Dell might dump shares. After selling some of its worst-performing units, Qualcomm indeed might be able to raise margins so that it can make more money on lower or flat sales. And Compaq's management could be on its way to continuing the turnaround. In their reactions to these warnings and reports, Wall Street's analysts have given you their informed opinions. Now it's up to you to decide for yourself whether Wall Street is right. After doing my own research, I happen to agree with the Wall Street story that I've outlined above in two of the three cases. That's why Dell is staying on Jubak's Picks and why Compaq isn't joining that portfolio."