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

To: rudedog who wrote (80639)	4/2/2000 5:02:00 PM
From: Elwood P. Dowd	Read Replies (1) \| Respond to of 97611

rude... Here's some "content" for ya! jjaja El - Sunday April 2, 2:00 pm Eastern Time Computer makers' 1st-quarter results seen flat after Y2K By Nicole Volpe NEW YORK, March 29 (Reuters) - Computer makers have spent most of the first quarter recovering from a Year 2000-related hangover, but they are already gearing up for the next party -- now unfolding in the booming electronic commerce market, where they can offer services and hardware for online businesses. Only in the last few weeks of the March quarter has the industry begun to recover from its new-year blues, analysts said. The sharp slowdown in the fourth quarter followed a heady surge early last year, as companies spent lavishly to assure their computer systems were ready for the Y2K challenge. ``Electronic commerce is the kind of party that never ends,' said Stephen Dube, analyst with Wasserstein Perella Securities. ``It doesn't have the time fuse of Dec. 31.' But while computer makers are stepping on to the new dance floor -- making alliances and unveiling new products and services for Web site management and online supplier exchanges -- the pulse of that market will take time to develop. In the meantime, the promising new sources of revenue will do little to shore up first-quarter results, which computer makers are due to report in April. In normal years, the computer business is strongest in the final quarter of the year, fueled by sales of PCs during the Christmas shopping season. A seasonal slump usually occurs in the first quarter. But the first three months of 1999 were different, with companies gearing up for Year 2000 computer fixes. With the Millennium Bug concerns now a fading memory, financial analysts have cautioned to expect a return to the typical first-quarter pattern -- a phenomenon the industry refers to as ``seasonality.' ``Generally speaking, the first quarter is not going to be a tremendous quarter,' said John Humphreys, an industry analyst with market research firm International Data Corp. ``I suspect we are getting back-to-normal seasonality.' Upcoming results will face difficult comparisons with the year-ago first quarter. Computer sales exploded not only because of Y2K concerns, but because a new category of ``free' and sub-$299 personal computers hit the market, bringing a new stratum of consumers into the market. Without fresh sources of demand this time around, the computer industry faces an uphill climb in comparison with the year-earlier quarter. As a result, many of the top computer makers are expected to generate first-quarter earnings that will show little change compared with the year-earlier quarter. Only in recent weeks, companies such as Dell Computer Corp. (NasdaqNM:DELL - news), International Business Machines Corp. (NYSE:IBM - news) and Compaq Computer Corp. (NYSE:CPQ - news) have begun to see corporate spending return to normal after the slowdown that took place in the fourth quarter and early part of the new year. ``The key to the first quarter is the recovery from Y2K,' Donaldson, Lufkin & Jenrette analyst Kevin McCarthy said. ``Assuming that demand really 'hockey-sticked' (upward) in the March quarter, how much of that will continue going forward?' he asked, referring to an upswing that had been expected near the end of the quarter. In a quarter in which Y2K delays have pushed business back to the final weeks, analysts said they they were facing a wide range of expectations based on computer makers' guidance. For while IBM and Compaq have struggled to produce single-digit revenue growth year to year, companies such as Dell and Sun Microsystems Inc. (NasdaqNM:SUNW - news) are expected to grow in the high 20 to low 30 percent range. While these varying growth prospects have been calculated into the values of the respective stocks, investors are more concerned about the companies' ability to execute against their promises and deliver on earnings expectations. ``You've got to look at expectations versus reality,' said Credit Suisse First Boston analyst Michael Kwatinetz. ``You have Gateway (NYSE:GTW - news) which guided fairly high, and then there is Dell, which lowered the bar (on expectations) and is in pretty good shape to make its numbers.' Beyond the numbers, analysts said they were more focused on who was positioned to capture growth in electronic commerce, as well as from upgrades by business customers to Microsoft Corp.'s (NasdaqNM:MSFT - news) Windows 2000 operating system. Both factors could signal growth in the market for servers needed for the heavy traffic of businesses online. Servers are computers that manage networks of other computers. ``Compaq and Dell own one-third of the PC server market,' said ING Barings analyst Robert Cihra, pointing out that server sales would also increase with upgrades to Windows 2000 in the second half. ``They are both well positioned for that.' Sun, whose servers power many heavily trafficked Internet sites, has made deep inroads in marketing its servers and software to Internet companies with its ``dot-com' campaign. As a result, Sun has seen its growth accelerate in recent quarters above its historic 20 to 25 percent growth range. In the first quarter, computer makers also moved their focus ``beyond the box,' to find new revenue sources aside from selling computers. Apple Computer Inc. (NasdaqNM:AAPL - news) in January said it would invest $200 million in the No. 2 Internet service provider EarthLink Network Inc. (NasdaqNM:ELNK - news), which would be the Internet service provider for Apple's Macintosh computers. ``Apple during the quarter was paid a fairly high royalty with EarthLink,' said Kwatinetz. Overall, analysts said they expected computer makers' efforts to begin to pay off later in the year. ``I think we may see a kink in the curve upward sometime between the second and third quarters,' said Dube of Wasserstein Perella. Company First Call/ Year-Ago Reporting Date Thomson Financial Qtr EPS estimate --------------------------------------------------------- Apple Computer (Q2) 0.80 0.60 4/19 Compaq Computer (Q1) 0.16 0.16 4/25 Dell Computer (Q1) 0.16 0.16 5/11 Gateway (Q1) 0.41 0.31 4/13 Hewlett-Packard (Q2) 0.82 0.73 5/16 IBM (Q1) 0.78 0.78 4/18 Sun Microsystems (Q3) 0.23 0.18 4/13