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

To: Night Writer who wrote (87136)	11/28/2000 1:34:36 PM
From: tonyt	Read Replies (1) \| Respond to of 97611

Compaq brings down hardware stocks By Jason Margolis, CBS.MarketWatch.com Last Update: 1:28 PM ET Nov 28, 2000 NEW YORK (CBS.MW) -- Compaq Computer shares were off Tuesday following a negative industry report issued by Salomon Smith Barney, pulling the hardware sector lower. The Goldman Sachs Computer Hardware Index ($GHA: news, msgs) , which tracks the stock movement of personal computer makers, storage providers and other hardware manufacturers, was down 3 percent to 446.27. The index hit a 52-week high of 679.34 on Sept. 1, equating to a loss of more than 34 percent in less than three months. A report released by Salomon analyst Richard Gardner painted a bleak picture for the PC industry, marked by waning demand and excess inventories. In the report, Gardner said he had multiple confirmations that several original equipment manufacturers had "stuffed the commercial channel," flooding the market with higher-than-usual inventories, in order to meet the most recent quarterly revenue expectations. The Salomon report cited Compaq as having "relatively high U.S. retail inventories," and as being one of the companies that resorted to goosing its product shipments to meet its quarterly results. Correspondingly, "we believe there is risk" to Compaq's revenue and earnings targets for the December quarter, said the report. Shares of Houston-based Compaq (CPQ: news, msgs) slipped $1.46, or 5.9 percent, to trade at $23.34 in recent action. Vulnerability to price war Bill Shope, senior analyst with ABN Amro, said that if it turns out that they have indeed been stuffing the product channel, it would exacerbate an already difficult time for PC manufacturers. "What we do know is that PC pricing is very aggressive and components prices are falling dramatically," said Shope. "In that scenario, vendors who sell through the indirect channel, like Compaq, get hit the hardest." Coupled with channel stuffing, Shope said that computer sellers faced with excess inventories would be forced to cut prices. "This cascades to other vendors and it leads to a price war," said Shope. Elsewhere, SCI Systems (SCI: news, msgs) , which manufactures electronic components for computers, saw its shares give back $2.81, or 7.8 percent, to $33.12. In Monday's session, the stock climbed by $1.94. Gateway (GTW: news, msgs) and Lexmark International (LXK: news, msgs) were the only hardware stocks posting moderate gains Tuesday.

To: Night Writer who wrote (87136)	11/28/2000 2:04:34 PM
From: profile_14	Read Replies (5) \| Respond to of 97611

NW, Living here in Palm Beach County, I make it my business to find out what is going on <G>. In fact, it has become almost an obsession for me lately, I am sorry to say. Personally, I suspect the real rally (if and when we get one) will be triggered by two distinct events. First, the rally will not begin until the month of November is complete. That is because the mutual funds that were selling in late October cannot repurchase before late November in order to avoid the wash sale rule. These guys have enough influence to control the market mood and keep prices depressed for a while, IMO, and they do not want to purchase at a price higher than what they sold it for earlier in the year. Second, from a political perspective, the US Supreme Court has never rendered a decision in less than 4 days, saying that any decision would not be forthcoming before the middle of next week at best, if they are satisfied with the oral arguments made later this Friday. From this decision, two things will happen. First, the simple case, nothing, which will allow the process to continue in the state courts until the 12th or beyond, with no finality unless an adverse decision against the Gore team is rendered making his effort futile going forward. Otherwise, contests could go on for several months if no one concedes -- easily. Second, if the US Supreme Court decides to reverse the FL Supreme Court, that may result in the Bush advantage being reset at 930 votes, what it was before the dimple counts, net of military votes. If 930 stands and not enough progress is made in the state court contest proceeding, Gore might concede, giving the market the impetus to rally through the end of the year. I suspect that anything short of a concession by one party will keep things status quo for now, but in no event do I see a rally without the fund managers repositioning themselves right now and without the political cloud being lifted. If CPQ were to go back to 28, my calls of this morning might might nearly quadruple. Twenty-eight is 5 bucks away, but not a far cry from where we've been. As to the quadruple, that would be sweet to say the least.