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

To: Night Writer who wrote (94583)	1/7/2002 2:36:05 PM
From: Elwood P. Dowd	Read Replies (1) \| Respond to of 97611

Fortuna/ML is probably married to a truckload of DELL shares. El

To: Night Writer who wrote (94583)	1/7/2002 3:11:22 PM
From: Elwood P. Dowd	Read Replies (1) \| Respond to of 97611

PCs Made It to Retailer's Christmas Party By Tim Arango Staff Reporter 01/07/2002 02:37 PM EST Though digital entertainment products were the top draw at electronics stores this Christmas, signs are emerging that there was also strength in an unexpected category: personal computers. After several quarters of declining sales, electronics chain and turnaround favorite Circuit City (CC:NYSE - news - commentary - research - analysis) said PC sales growth was slightly positive in December on a same-store sales basis. Circuit City's comments came just as Compaq (CPQ:NYSE - news - commentary - research - analysis) surprised investors by saying it expects to make money in the fourth quarter and some Wall Street analysts upgraded their outlooks for PC makers. The upturn in the notoriously slow-growth and low-margin product line helped Circuit City report a 10% increase in comparable-store sales in December, compared with a year ago. At the same time, Circuit City said it expects fourth-quarter earnings of 72 cents to 76 cents a share, compared with analyst expectations of 71 cents, according to Thomson Financial/First Call. Still, the main driver of growth at Circuit City and its larger rival Best Buy (BBY:NYSE - news - commentary - research - analysis), which is scheduled to report December sales on Jan. 9, is home entertainment products such as video game systems and DVD players and software. "Best Buy and Circuit City have essentially learned from McDonald's," says Donald Trott, an analyst at Jefferies. "And what did McDonald's do? It realized that the highest-margin product was the soda, so to get people to buy more soda they created the value meal." Similarly, electronics chains have started to bundle computer hardware with higher-margin accessories such as software, he says. (Trott has a buy recommendation on Circuit City, and his firm does not have a banking relationship with the company.) The positive news from Circuit City sent shares in the sector up Monday. Circuit City was up lately $2.43, or 8.8%, at $29.89, while Best Buy was up $1.87 at $75.75. Meanwhile, shares in RadioShack (RSH:NYSE - news - commentary - research - analysis), which reported Monday that same-store sales in December declined 2%, were up lately $1.89, or 6.4%, at $31.52. RadioShack said, however, that computer sales fell 50%, though the company had previously said it was moving away from personal computers to focus on electronics accessories.

To: Night Writer who wrote (94583)	1/7/2002 6:27:04 PM
From: hlpinout	Respond to of 97611

From Financial Times. -- Compaq says it will report fourth-quarter profit By Paul Abrahams in San Francisco and Tally Goldstein in New York Published: January 7 2002 15:36 \| Last Updated: January 7 2002 20:09 Compaq Computer, the US personal computer manufactuer, said on Monday that fourth-quarter revenues would be better than expected and that it would report a quarterly profit. The positive pre-announcement was the latest in a series of such statements, indicating that the deterioration in earnings among US companies may be coming to an end. The news may also indicate the personal computer industry is beginning to recover. Other recent upbeat pre-announcements include those from Nortel Networks, Honeywell, and Proctor & Gamble during December. Compaq, which has accepted a $25bn takeover bid by Hewlett-Packard, said sales would exceed $8bn, compared with previous guidance of between $7.6bn to $7.8bn and a per share loss of three cents. Since it announced its takeover bid in September, HP has been on the defensive. Both Wall Street analysts and the Packard Foundation, HP's largest shareholder, have criticised the HP-Compaq merger proposal. In regards to the positive fourth-quarter results, Michael Capellas, Compaq chairman and chief executive, said: "These results represent strong execution and Compaq's solid momentum in the marketplace." There had been fears that the company would be distracted from its business during its messy pre-acquisition period. The group, which will report earnings on January 16, did not give reasons for its better than expected results. However, Steven Fortuna, analyst at Merrill Lynch, said he thought Compaq had benefited from increased demand for personal computers in the consumer market. The company had also benefited from strong sales in Europe and had made huge strides in improving its own inventories and those in channels, which respectively declined $1.5bn and $1bn last year, said Daniel Niles, a Lehman Brothers Analysts. Compaq had now moved its US distribution model to a direct and auto-replenish model, allowing it to compete more effectively with Dell, he explained. PC sales in the US during the fourth quarter jumped 30 per cent sequentially thanks to a strong holiday demand, according to Salomon Smith Barney. This was better than the typical 15-20 per cent jump, partly because of a sub-par September, said Richard Gardner, an analyst with the firm. Demand in Europe also picked up, by about 5-10 per cent quarter on quarter. Mr Fortuna at Merrill Lynch said the upturn in PC demand could mean better-than-expected quarterly results by rivals, Dell, Gateway and Apple. However, Mr Fortuna warned that he did not expect Compaq's revenue strength to continue for the first half of this year. Mr Gardner at Salomon Smith Barney agreed that any improvement in the US economy would not prevent American PC sales falling quarter on quarter during the first three months of 2002. Shares in the company edged up 2 per cent in midday trading to $11.62. Additional reporting Mary Chung