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

To: hlpinout who wrote (89255)	1/25/2001 7:33:33 PM
From: hlpinout	Respond to of 97611

Ugh. -- Upgrade zaps Compaq's iPaq handhelds By Ian Fried Staff Writer, CNET News.com January 25, 2001, 12:45 p.m. PT An upgrade designed to offer modest improvements to Compaq Computer's iPaq handheld turned into a major headache this week for a number of people who discovered that the update rendered their devices unusable. Compaq said it pulled the downloadable upgrade from its Web site Tuesday, only hours after it was posted, when it received reports of problems. Compaq asked people whose devices crashed after downloading the upgrade--the iPaq's first--to send their handhelds back to the company for repair. "The vast majority of people who downloaded the upgrade installed it and installed it successfully," said John Brandewie, product manager for the iPaq Pocket PC. The total number of problems reported to the company's customer service center is "in the single digits," he said. "We're going to figure out what's wrong with it, and we're going to repost it when it's fixed," Brandewie said. He estimated that the number of people who downloaded the upgrade before it was removed from Compaq's Web site was in the hundreds. Jeremy Horwitz, a student at Cornell Law School in Ithaca, N.Y., said he downloaded the upgrade Tuesday. The first time he tried to install it he got an error message, and the second time, late Wednesday night, the handheld died. "To their credit, they are answering phone calls at 3 a.m.," Horwitz said. However, Horwitz said he is frustrated to be without his handheld, especially since this is the third time he has had to send back his iPaq since buying it at Thanksgiving. "To be without your organizer because Compaq released a faulty upgrade is just absolutely insane," Horwitz said. The problem appears to be with the software that installs the upgrade, Brandewie said, not the update itself. Compaq doesn't know yet why some people's handhelds are crashing and others are not, he added. Those who successfully install the upgrade should have no problems. However, Brandewie suggested that anyone still considering adding the update wait for Compaq to post an improved version to its Web site. The upgrade, a new version of the iPaq's read-only memory (ROM), offers relatively modest changes, such as a minor update to the Pocket PC operating system, better drivers to improve the connection between the handheld and a PC, and visual improvements such as snazzier icons and better-looking menu bars. Although this upgrade is relatively minor, Compaq touts the ability to upgrade the handheld's ROM as a key feature. Other handhelds with Microsoft's Pocket PC operating system cannot be upgraded in such a manner. "We think it's one of our advantages," Brandewie said. "We can incorporate enhancements to the Compaq portion of the software" or those from Microsoft. Unveiled in April, the iPaq handheld has been a hot commodity, as a component crunch limited Compaq's ability to produce enough of the units to meet demand. When it began shipping last summer, the unit was selling for $700 and $800 on online auctions at eBay and Amazon, well above its $499 sticker price.

To: hlpinout who wrote (89255)	1/25/2001 7:45:10 PM
From: hlpinout	Read Replies (1) \| Respond to of 97611

Love the optimism...not. (Although I agree immensely with the statement in bold.) -- Don't Be Bowled Over By Compaq's Numbers Tara Murphy, Forbes.com, 01.25.01, 12:35 PM ET NEW YORK - You're a PC investor that stuck out the frustrating fourth-quarter confessions, only to have your confidence restored by better-than-expected fourth-quarter reports from Compaq Computer and IBM. Pat yourself on the back because you have a stomach of steel. Before you congratulate yourself too much, though, you might want to consider the circumstances that led to this renewed optimism. "We were expecting a poor showing, and we're getting good reports on lower expectations," says Bill Shope, PC analyst at ABN Amro. True, Compaq (nyse: CPQ)surprised the market on Tuesday with a 30-cent profit in the fourth quarter, topping analyst estimates of 28 cents a share. Those estimates had been revised downward, though. Be aware: Lehman Brothers is excluding PC stocks from the firm's own stock portfolio, according to Jeffrey Applegate, Lehman's chief market analyst. "The earnings growth of the past won't be repeated in the future. Internet access isn't going to be as PC dependant as it has been in the past," says Applegate, describing why his firm is bearish on the sector. Waning demand and inventory buildup is still a problem for the PC industry. Compaq had a blowout yesterday, but Shope says that the company's guidance for flat sales growth in the first quarter and 6% to 8% revenue growth in 2001 suggests tough times ahead. This may not be enough to counter positive fourth-quarter results at the company's enterprise server and software business lines. "Compaq is doing well, considering the situation, but it doesn't mean that PC problems are behind us. It's going to be a rough first half," says Shope. The situation might not be as dire as it sounds, though. "Stock selection is very important because it's not a fixed-cost industry where stocks move up and down in cycles. Don't buy a basket of PC stocks, pick the best business model," Shope says. Shope's top pick: Dell Computer (nasdaq: DELL). He says its direct distributional model gives it the best defense in a market environment that's tainted by pricing pressure and soft demand. Ed Hemmelgarn, hedge fund manager at Shaker Investments, says although the PC industry could warm up with the acceleration of Window 2000, it won't be as hot as other segments of technology. "I think the PC business, at least domestically, is a much more mature business, so I think that there are better places to make money like communications-related stocks." He points to the incorporation of Broadcom (nasdaq: BRCM) technology in Gateway's (nyse: GTW) PCs. Though this might seem to offer a competitive advantage to Gateway, it's a better play for Broadcom, which is supplying chips that ease digital subscriber line or high-speed modem connections. Uncertainty over PC growth rates could create some bargains. "They've certainly come down in price," says Hemmelgarn, "but I'm not so sure that I would describe it as a value play yet." Dell still sells at 30 times cash flow. Better value plays: Both Compaq and Gateway are at the lower end of their historic price-to-earnings ratios.