Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: MeDroogies who wrote (87907)	12/14/2000 12:30:30 PM
From: John Koligman	Read Replies (1) \| Respond to of 97611

Analyst comments from Dow Jones.. John December 13, 2000 Dow Jones Newswires Compaq Dn -3: Turnaround Strides Seen As Not Enough Dow Jones Newswires In a research report issued Wednesday Bear Stearns analyst Andrew Neff cut his rating on Compaq to neutral from attractive, saying Compaq's prospects for a turnaround seem more "remote." He also questioned the company's potential to sell its wares in the enterprise or corporate market. The Compaq turnaround story began in July of 1999 when Michael Capellas, Compaq's current chairman and chief executive, took over the helm at the then struggling PC maker and forged ahead with the task of turning it around. Among the many things Compaq needed was to rebuild was its dwindling executive ranks, shake off of its reputation as an Internet laggard and reinvigorate the corporate PC business which was reeling from declining sales. Since then, Capellas has been able to boost corporate sales and make a name for Compaq in the server business. Despite all its efforts, Neff said in the research note that he was concerned about the "anemic nature" of its turnaround. He did note that Compaq "may be of interest to value oriented accounts since the stock is selling at low levels relative to historic levels on both an absolute and relative price-to-sales basis." Richard Chu, an analyst at S.G. Cowen Securities cut his rating on Compaq to neutral from buy, and also took issue with Compaq's server business. In a research note Chu said "we are concerned that Compaq's most notable areas of strength, namely its industry standard server business is exposed to potentially more competition and pricing pressure in the year up ahead." He also noted that Compaq's large exposure to consumer PCs and the channel model makes "life somewhat risky" in an aggressive competitive pricing environment. However Chu applauded Compaq's progress with its turnaround up until Tuesday's warning. "Obviously the Q4 miss is an unfortunate one for Compaq," said Chu. "Given that with Michael Capellas at the helm, the company had posted four full quarters of on-track results and very much appeared to be on the mend." ING Barings analyst Rob Cihra agreed that Compaq has made strides in its turnaround, but they don't seem to be enough. "Although the company has regained end-market momentum, returned PCs to profitability, extended its core Intel server dominance and begun to roll out a true (Internet )iAppliances strategy, Compaq's stock is back to where we started," he wrote. Cihra, who had already slashed his estimates on Compaq said those reductions were clearly not enough. The analyst now expects Compaq to post fourth quarter revenue of $11.2 billion to $11.4 billion and earnings per share of 28 cents to 30 cents. Cihra had previously forecasted the company would come in with revenue of $12.1 billion and earnings of 35 cents a share. The analyst also cut his rating to buy from strong buy. "We expect aggressive pricing through this period of softer spending which seems likely to cloud the outlook for PC stocks and limit talk of an upside for another few months," said Cihra. "As such, we are lowering our rating on CPQ to buy from strong buy, for now, with a price target of $30 or 25x our 2001 EPS estimate."