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

To: Night Writer who wrote (89157)	1/24/2001 12:40:24 AM
From: Elwood P. Dowd	Respond to of 97611

zimmy, morningstar likes Compaq's focus by: skeptically 01/23/01 11:35 pm EST Msg: 213693 of 213711 This must have been written for you zimmy. biz.yahoo.com Tuesday January 23, 7:00 pm Eastern Time Morningstar.com Investors Love Compaq's Focus on the Bottom Line By Joseph Beaulieu What Happened? Compaq Computer (NYSE: CPQ - news) reported fourth-quarter revenue in line with expectations, and beat the First Call consensus earnings-per-share estimate of $0.28 by two cents. These results are still well below original targets for the quarter, which were revised after the company issued an earnings warning in mid-December. Compaq's diversification served the company well, with enterprise computing revenue growing 20%, server revenue growing 22%, and storage revenues growing 17%. PCs, as expected, were the weak link in the quarter, with corporate PCs up 11% and consumer business up a mere 3.5%. What It Means for Investors Compaq is taking a more conservative approach to today's difficult PC market than its arch-competitor Dell (Nasdaq: DELL - news). Compaq is focusing on profitable growth, and isn't willing to play the price-slashing game with Dell. As a result, both gross and operating margins improved in the quarter, and the company was able to leverage modest revenue growth of 10% into operating profit growth of 80%. We think that Compaq shares look very reasonably priced at their current level from a long-term perspective, even after rising 20% in after-hours trading. The company is well-positioned in the enterprise computing market, and our concerns of December-quarter weakness on that side of the business appear to have been a bit overblown. However, given the fairly dismal state of the PC industry (which still generates about half of total revenues), and given that Compaq expects essentially no growth in the first quarter of 2001 and only mid-single-digit revenue growth for the full year, we think the stock is likely to be volatile in the coming weeks and months. We would therefore wait for the earnings-related euphoria to wear off just a bit before buying the stock. Morningstar.com's Premium subscribers can read the full Analyst Report on this stock. Or read Analyst Reports on 1,000 stocks and 2,000 funds, free for 30 days. Posted as a reply to: Msg 213671 by zimchic3