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

To: beachbum who wrote (89313)	1/28/2001 5:53:38 PM
From: hlpinout	Respond to of 97611

Hello BB, I prefer to think of it as Compaq is going to invade and capture the EMC territory by undercutting the pricing and not sacrificing profits for volume. This article sort of shows what can happen if you consider Compaq as Kimberly Clark and PG as EMC. -- 01/28 09:58 Procter & Gamble May Miss 2nd-Half Forecasts, Investors Say By Steve Matthews Cincinnati, Jan. 28 (Bloomberg) -- Procter & Gamble Co., the largest U.S. maker of household products, may miss sales and profit forecasts in the second half of fiscal 2001 because rivals are keeping prices low, investors said. The company raised prices in the first half ended Dec. 31 on its biggest brands, including Pampers diapers and Bounty towels, to make up for rising energy and paper pulp costs. Price increases averaging 3 percent to 4 percent across its 300 brands are crucial to Chief Executive A.G. Lafley's plan to boost sales this year by 2 to 3 percent and per-share earnings by 7 to 10 percent. Kimberly-Clark Corp. and other rivals haven't matched all of the price increases, which may lead Procter & Gamble to cut some of them or lose customers to cheaper brands, investors said. A slowdown in the U.S. economy that's damped consumer spending also may hurt sales. Procter & Gamble may lower forecasts as early as Tuesday, when it reports second-quarter earnings, investors said. ``This is not a quick turnaround,'' said Chuck Stutenroth, portfolio manager with Fort Washington Investment Advisers, which owns 1.3 million shares. ``In an environment where higher prices don't stick, revenue growth is a challenge.'' Procter & Gamble spokesman Tom Millikin declined to comment. Analysts' earnings forecasts for this year range from $3.10 to $3.17 a share, for an average of $3.14, according to those polled by First Call/Thomson Financial. Last year, Procter & Gamble earned $2.95 a share. Cincinnati-based Procter & Gamble's stock fell 69 cents to $69.25 on Friday. The shares have dropped more than 31 percent the past year. Bounty Prices Rolled Back When Procter & Gamble in April raised prices on Bounty towels by 9 percent to make up for higher pulp costs, competitors didn't follow its lead and consumers went for the cheaper brands. The company cut half of the increase in November, Chief Financial Officer Clayton Daley told investors at a Goldman, Sachs & Co. conference in Miami earlier this month. That may well happen again with price increases on other lines. ``The clear risk in the second half is pricing and the competitive environment,'' said Daley, who didn't lower the outlook for earnings. Procter & Gamble also raised prices on feminine-care products, such as a 4.5 percent increase on its Always line in July. The company raised detergent prices by 6.4 percent and diaper prices by 6 percent in September. ``My take out of Florida is they are preparing people for a challenging second half of the year,'' said analyst Patrick Schumann of Edward D. Jones & Co., who rates the stock a ``buy.'' ``It wouldn't come as a surprise'' if they miss forecasts. Premium Products Lafley took over the maker of Tide detergent and Crest toothpaste after Durk Jager was ousted in June. During Jager's 17- month tenure, the company had its first earnings decline in nine years and missed sales or profit estimates three times in four months. Lafley has said Procter & Gamble is focused mostly on building sales of large businesses by creating premium-priced products that outperform rivals'. The company's Tide line, for example, introduced laundry tablets in the U.S. in October and Bounty just started selling napkins that it says are more absorbent than others. A slowing economy means some U.S. consumers will trade down to cheaper brands such as Wal-Mart Stores Inc.'s White Cloud diapers and toilet tissue, investors said. ``People are watching their pennies,'' said Marvin Roffman, president of Roffman Miller Associates, which owns Procter & Gamble shares. ``There are very few companies that are immune from this.'' Procter & Gamble's U.S. sales aren't rising as fast as competitors' in some of its largest businesses. The company's share of the paper-towel market fell to 40 percent in the 13 weeks ended Dec. 30 from 42 percent a year earlier, according to ACNielsen, a research firm. Its share of the diaper market fell to 34 percent from 38 percent, the firm said. Another concern is declining currencies worldwide, which reduces the value of overseas sales when translated into dollars, analysts said. In the past 12 months, the euro has fallen 7.8 percent, the British pound has fallen 11 percent and the Japanese yen has fallen 9.6 percent. Investors said that while they approve of Lafley's efforts to restore profit growth, it takes time to accelerate revenue in a company with $40 billion in annual sales. ``It's a concern to us'' that the company will lower forecasts, said Brian Slater, portfolio manager with Condor Capital Management, which owns Procter & Gamble shares. Revenue ``has been anemic. You have to give him time to straighten things out.''