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

To: MeDroogies who wrote (91429)	6/1/2001 4:55:28 PM
From: Elwood P. Dowd	Read Replies (1) \| Respond to of 97611

Merrill: Intraday note(Winkler, Lewis) by: skeptically 06/01/01 04:36 pm EDT Msg: 237539 of 237542 Compaq (CPQ; $15.89; B-2-2-7) 01E $0.45; 02E $0.65 Additional details: • Mike Winkler, Compaq’s EVP of Global Business Units, the company’s strategy of providing innovative products, end-to-end solutions, and global delivery of sales and services. • There is some sense that the US malaise in IT spending is spreading to Europe. It is evident in the UK. • Compaq has targeted several verticals: Telco, financial services, e-business/e-government, retail, life sciences, health care and phama, media and entertainment, manufacturing. • Compaq sees most of these verticals reducing IT expenditures with the Telco area being the worst performer. Pharmaceuticals doing very well now though. • Compaq sees its advantage in industry standard servers (wintel servers) coming from the superior managability of its products (i.e. Load balancing). Compaq’s support services are also very highly rated. • Compaq sees IA 64 having a proracted growth period. The McInley chip should be the first real volume chip w/IA 64. • Compaq sees IA-64 with Windows 2000 beginning to eviscerate low/mid range Unix starting in 2003. • Windows 2000 and XP roll-outs, combined with Y2K refresh cycle should lead to an upgrade cycle next year. • Compaq’s Unix products seeing real expansion in the Oracle environment. Compaq’s competitive edge in Unix is its clustering capability. • Managing to gross margin percentage at high end and gross margin dollars at the low end. The operating margin target for enterprise products is 10%-12%. (S. Fortuna/M. Hillmeyer) Compaq (CPQ; $15.89; B-2-2-7) 01E $0.45; 02E $0.65 Part III: • Mark Lewis, Compaq’s VP and GM of the Enterprise Storage Group, indicated that this newly formed group did about $2 billion in pro-forma revenue in 2000. The group includes SANs, external direct storage, software and tape. NAS products are part of the industry standard server group. • Storage drivers include: • The information exlosion from the Internet, rich media, and video. Storage is the fastest growing segment in IT infrastructure. Incremental storage spending can't be postponed by companies - least discretionary part of IT budget. Storage cost reductions continue to drive new market applications. • Compaq sees today's storage environment as only 50% efficient. Storage is not always where it is needed. SANs take it to 75% and Compaq sees the goal as 95% efficiency with software as the driver of efficiently using hardware resources. • By 2003, Compaq sees 75% of IT infrastructure dollars being spent on storage, up from 25% in 1998 and 50% today. • Compaq's total storage revenue in 2000 (internal and external) was around $6 billion. The operating margin should be at the high end of Compaq's range for its overall enterprise business of 10-12%. • Compaq does not see SANs commoditizing anytime soon. The value is in the sofware (i.e. Managability) SAN customers see their base hardware acquisition cost only representing 10% of total life-cycle storage costs. But, those customers who implemented SANs felt that with a given levelof resources, they could manage 3.7 times as much storage than with distributed, direct-attached storage. This is a cost savings. • Compaq wants to make storage a utility service to the enerprise. (S. Fortuna/M. Hillmeyer) Merrill: Intraday note, (Capellas) by: skeptically 06/01/01 04:36 pm EDT Msg: 237540 of 237543 Compaq (CPQ; $15.79; B-2-2-7) 01E $0.45; 02E $0.65 Part V CEO Mike Capellas 1. Compaq is seeing major changes in buying patterns. Standard building blocks are becoming more important. IT is now often seen as a variable cost. Managability and Services most important now. Customers will pay for differentiated products but there is little differentiation at the low end. 2. The middle of the Unix market is now being compresed. This could affect SUN. 3. Pricing: A) Desktops - competitve and will remain so. B) Notebooks - more competitive now but Compaq thinks it can keep a premium due to better technology such as new portables with integrated wireless and better managability. C) Handhelds - will keep a premium here. D) Industry standard servers - very aggressive in 1p and 2p servers, now at market pricing; still commanding a premium in 4-way and 8-way servers. E) Unix servers - already price competitive. F) Storage - CPQ already a cost leader here. 4. 64 bit Unix could be eclipsed by 64 bit Intel down the road. Compaq’s clustering (w/partitioning) experience in its Alpha Unix servers should be an advantage in transitioning to 64 bit Intel. 5. Low end manufacturing outsourcing transition should be completed by the end of this year. (S. Fortuna/M. Hillmeyer)