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

To: MikeyT who wrote (79438)	3/13/2000 7:14:00 PM
From: Elwood P. Dowd	Read Replies (2) \| Respond to of 97611

Monday March 13, 6:12 pm Eastern Time D&P rates Compaq debt and commercial paper (Press release provided by Duff & Phelps Credit Rating Co.) Chicago (March 13, 2000) -- Duff & Phelps Credit Rating Co. (DCR) has assigned an initial public rating of A- (Single-A-Minus) to Compaq Computer Corporation's (NYSE: CPQ) senior unsecured debt and revolving credit facility and a rating of D-1- (D-One-Minus) to Compaq's commercial paper. The Rating Outlook is Stable. The ratings reflect Compaq's imposing position as the world's second largest computer company in terms of revenues and largest in terms of units; the breadth of its product line from hand-helds to supercomputers; the stability added by its services offerings; the wide geographic revenue base; and the diversity of its distribution channels and end markets. Compaq's 1999 revenues grew 24 percent to $39 billion on a combination of internal growth and acquisitions. Compaq is now primarily a large-computer vendor rather than a PC company. Enterprise-scale solutions and services contributed 52 percent of revenues and carried the highest operating margin. Commercial PCs added 30 percent of revenues, consumer PCs 19 percent, and other 1 percent. Foreign sales brought in 55 percent of revenues. DCR's ratings reflect Compaq's diversification which partly offsets the volatility and margin pressures of the PC business. The ratings also consider the competitive challenges Compaq's traditional indirect PC distribution model faces from the more streamlined direct distribution model favored by some of its faster-growing competitors. DCR is encouraged by Compaq's steps to compete more effectively in the direct distribution channel, most recently its $370 million purchase of configuration and distribution assets from Inacom Corp., but it also expects Compaq to remain the major factor and improve profits in the value-added PC reseller channel. Other improvements are expected to come from continuing restructuring activities under a June 1998 charge for integration of the enterprise product line, combining Compaqs traditional industry-standard servers with products of the acquired Tandem Computers Incorporated and Digital Equipment Corporation, and a September 1999 charge for reduction of redundant overhead and infrastructure. Compaq has not traditionally been a major issuer of debt, and DCR believes generated cash flow is adequate to fund normal operations. However, with significant non- linearity of revenues and cash receipts, especially in Compaq's enterprise business, debt-supported liquidity is useful for intra-period working capital. In addition, Compaq has a rapidly growing end-user equipment financing business, with about $1.8 billion of assets currently under lease. DCR expects Compaq to initiate formal longer-term debt programs, especially in support of end- customer leasing programs, with duration matching duration of the leases. Compaq has a $1.5 billion commercial paper program in the name of the parent and a $1.0 billion program in the name of Compaq Financial Services (CFS). A total of $453 million was outstanding December 31, 1999. A $1.0 billion revolving credit agreement expiring October 2000 and a $3.0 billion one expiring October 2002 provide additional liquidity and back up the CP programs. DCR's senior unsecured rating refers to vestigial Compaq and to Digital debt with fair value of approximately $80 million not tendered pursuant to Compaqs offer of June 1998. Additional rating action by DCR will focus on managements success in its programs to improve revenue growth, profitability, and cash flow of Compaq's businesses in a competitive and rapidly changing business environment. More Quotes and News: Compaq Computer Corp (NYSE:CPQ - news) Related News Categories: US Market News