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

To: Night Writer who wrote (84313)	8/18/2000 6:38:18 PM
From: Night Writer	Read Replies (1) \| Respond to of 97611

Stock Falls as Sales of Hewlett-Packards Servers Fail to Impress Analysts Aug. 18 (The Sacramento Bee/KRTBN)--On second thought, Wall Street declared Thursday, Hewlett-Packard Co.'s profits weren't so swell after all. HP's stock tumbled almost 10 percent, surrendering the gains the shares enjoyed Wednesday, after several industry analysts said they weren't so enthused with the 23 percent increase in quarterly profits reported. One of their complaints focused on a product line assembled at HP's Roseville facility: the high-octane Unix servers that power Internet sites and in-house corporate computer networks. Although HP's server revenue was up 13 percent in the quarter, some analysts grumbled that the sales growth wasn't up to expectations. They also noted that sales of HP's most expensive servers actually fell during the quarter. HP "had definitely built up expectations," said Tim Ghriskey, senior portfolio manager with Dreyfus Corp. in New York. Company officials had said on Wednesday that high-end server sales fell because customers were anticipating the mid-September release of a new high-end server product, called SuperDome, which will also be assembled in Roseville. Ghriskey called the explanation plausible, saying, "Whenever I know there's a new product coming out, I wait, too." But he said the slump reminded investors that the server business is extremely competitive, with companies like IBM Corp., Compaq Computer Corp. and Sun Microsystems Inc. making significant strides. "You have a lot of players; it's where everyone wants to be," Ghriskey said. Some 70 percent of HP's Unix servers are assembled at a 700-employee Roseville factory the company opened last year. HP employs a total of 6, 200 workers in Roseville. HP shares fell Thursday to $109, a drop of $11.875, on the New York Stock Exchange. The day before, the stock soared more than $9 a share in after-hours trading following the earnings announcement. HP, hailing what it called "superb results," said its third quarter profits jumped to $1.05 billion from $853 million. Per-share earnings increased to 97 cents from 71 cents, and HP also announced a 2-for-1 stock split. Although those results exceeded Wall Street analysts' expectations of 85 cents a share, analysts quickly began picking apart the numbers. Besides expressing concern over the server business, they complained that some of the profit gain was the result of foreign currency gains, lower tax rates and other factors that had little to do with the basics of HP's business. "The numbers weren't as good as they looked," said Jerry Dodson of Parnassus Equity Income Fund in San Francisco. Still, he said the company's fortunes look bright. By Dale Kasler