Ya know, Mike, you have got to stop fixating on 6 cent moves in this stock.
Rude, help me out here, something is wrong with this picture. CPQ should be screaming with socko boffo earnings.
And El, who gives a damn what the analysts think about CPQ being a PC company, if in REALITY they have made a transition to Medium Iron.
Intel is way late on the IA-64, AMD is giving the price of discounted chips to box makers a new definition of cheap, and CPQ which in theory seems to be perfectly positioned to take advantage can't seem to get out of its own way.
It should have had record earnings this quarter, with the deemphasis of PC reliance.
What the heck happened to the move to the more direct distribution model. 3.7 weeks of inventory, my ass.
What happened to the 8000 job cuts streamline BS.
Have you been on both Dell's and and CPQ web sight lately. I'm no expert in the area, but CPQ's website seems garbled jumbled and confused, compared to Dell's.
Sure the hand held ipac is a smash, and this huge powerhouse manufacturing Behemoth can only manufacture 100,000 a month. Cryps, SIII could do that with the original MP3 BEFORE they went out of business.
I am not a compaq basher.
BUT THERE'S SOMETHIN' HAPPENIN' HERE, AND WHAT IT IS AIN'T EXACTLY CLEAR.
This company is looking more like the U.S. Post Office than Let's Make a Deal.
And then of course, there's Jim Seymour's opinion from the Street dot com:
Compaq: Juggling the Numbers in Houston
By Jim Seymour
Special to TheStreet.com
Originally posted at 11:30 AM ET 1/24/01 on RealMoney.com
Lots of buzz Wednesday morning on the Street about Compaq's (CPQ:NYSE - news) numbers in its conference call Tuesday night. Briefly, the Houston PC and server maker earned 30 cents per share on revenue of $11.5 billion. The First Call/Thomson Financial consensus was 28 cents, and the company also topped the revenue estimate, by about $200 million.
(But remember that these consensus numbers were based on Compaq's sharply downward guidance in December. Jim Cramer's line here the other day -- "reduce people's expectations far enough and sooner or later you'll meet them" -- comes to mind.)
Anyway, they beat the numbers, which was a good thing.
But what about the year ahead? Bizarrely, Compaq CEO Mike Capellas told analysts on the call to look for fiscal-year 2001 revenue growth in the 6%-to-8% range ... but earnings-per-share growth in the 20%-to-25% range. Huh?
In this market?
Worse, even if Compaq can grow revenue at the top of Capellas' range, around 8%, that still predicts a $450 million miss on analysts' consensus for the year.
There's more to the "New Math of Capellas" in Tom Lepri's excellent article, which has all the numbers, and more on some of the odd twists in this tale.
There was more guiding down in the call: Capellas said first-quarter 2001 revenue will come in around $9.6 billion, nearly flat from the quarter a year ago, and down $600 million from the Multex estimate. But Compaq didn't guide down its earnings for 2001.
And Capellas said the company's first-quarter earnings per share should run about 21 cents, better than the consensus, despite the revenue issues.
Once again: Huh?
Just how can a company guide its earnings per share flat or up, on a likely shortfall of that dimension?
There was talk on the call about not going hog-wild with aggressive pricing. Goodbye, low-end PC success -- though that battleground has historically been a pretty good business for Compaq. Aggressive pricing in other areas of its business? No details, but it sounds as if Capellas, who spoke of buying market share through low prices as more like "renting market share," is gun-shy from earlier efforts by Compaq's management to buy, lease or rent share.
This comes at an odd moment. Not only do we have the mystery Wednesday morning of how Compaq will deliver the same EPS on a reduced-revenue base, but I also wonder about Capellas' reluctance to fight it out on prices, especially if, as apparently is the case, that extends to its other, business-oriented lines.
It may not have much choice.
Example: Servers are a huge and vitally important business for Compaq. The hot corner of the server business right now is the compact, rack-mounted "thin server," which allows companies -- mainly Internet service providers, but this is also a big corporate business -- to add capacity incrementally. You can stack up to 42 of these so-called 1u -- which means they're one unit, or 1 3/4 inch, high -- thin servers in a standard electronics rack. That's welcome news to companies tired of huge bills every time they increase capacity.
No more refrigerator-sized servers, with their huge price tags. Just throw another thin server on the barbie, thanks.
Thin servers were the reason, for example, that Sun (SUNW:Nasdaq - news) bought Cobalt, whose Raq line of rack-mountable thin servers was soaring. It's why nearly every company in the server business is cranking out thin servers, and pricing them aggressively.
Compaq had been making hay in thin servers. Its hot product has been the ProLiant DL 380, a very nice 1u "slice." With one 866 megahertz Pentium III processor, a nine-gigabyte hard disk and 128 megabytes of memory, Compaq lists the DL380 for $4,352. (Putting just 128 megabytes of RAM in a server is nonsense; you need at least four megabytes. But everyone uses a 128-megabyte "base" RAM figure for price comparisons.)
So in December, Dell (DELL:Nasdaq - news) came out with its new 1u model 1550 PowerEdge thin server. With two 866 megahertz Pentium III CPUs, three low-profile SCSI 9.1 gigabyte hard disks, and the same 128 megabytes of RAM, the 1550 costs just $3,376.
Excuse me, Mike -- what were you saying about how you're not going to get aggressive about pricing? Then just what are you going to do when a respected, aggressive competitor undercuts you by such a huge margin?
Tough to understand how Compaq delivers the same earnings per share on drastically reduced revenue. Tougher still to see how it is going to hit even those lower revenue expectations if it doesn't get competitive in its pricing.
But analysts loved the mood of the call, even if they apparently didn't understand the numbers. Wednesday morning Lehman Brothers and JP Morgan both issued upgrades on Compaq, and the stock was trading up three bucks, or about 13%, shortly after the market opened.
Call that a $5 billion-plus bump. Never underestimate the value of a CEO who can tap dance over the phone.
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