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

To: Night Writer who wrote (97229)	4/18/2002 7:31:10 PM
From: Elwood P. Dowd	Respond to of 97611

Computer makers say sales may have hit low water By Nicole Volpe NEW YORK, April 18 (Reuters) - Computer makers, stretched to the limit by a slowdown in spending by both businesses and consumers, have posted dismal earnings this quarter, but executives and analysts said they see small signs that the market may yet snap back a bit this year. ``The market clearly slowed down a lot, but we think we're going to see a bit of a rubber band effect,'' said International Data Corp. analyst Loren Loverde. First-quarter results this week were a rough ride. IBM (NYSE:IBM - news), the world's largest computer maker, reported its sharpest drop in earnings since 1993. Intel Corp. (NasdaqNM:INTC - news), the No. 1 chipmaker for personal computers, posted lower earnings than a year earlier. Microsoft Corp. (NasdaqNM:MSFT - news), which makes the operating systems that run on most personal computers, posted disappointing sales. It also said that while personal computer sales to consumers may improve in the current second quarter, business spending would be ``quite modest.'' But in conference calls with Wall Street analysts, and in orders numbers that reflect future demand, there was some small sign of hope for the second half of the year. IBM signed more than $15 billion in services contracts, leading the company to say it expects to meet analysts' 2002 estimates as services revenue returns to double-digit growth. Paul Otellini, Intel's president and chief operating officer, spoke about ``the inevitable recovery,'' despite the fact that so far demand for personal computers has yet to materialize. Compaq Computer Corp. (NYSE:CPQ - news), which has agreed to be acquired by rival Hewlett-Packard Co. (NYSE:HWP - news), said it had managed to eke out about $1 billion in major account orders despite lower capital spending by corporations. But not everyone believed that a recovery was close at hand. ``It comes down to end demand and how well that's tracking, and it doesn't seem to be doing all that well, from what we can tell,'' said Lehman Brothers analyst Dan Niles. SLACK-WATER CONDITIONS But industry analysts said the personal computer sector had hit a low, at least in the United States. ``We're in slack-water conditions -- that period between the tides when the sea is fully out but has not yet come back in.'' said IDC analyst Roger Kay. ``The good news is that the U.S. market has truly reached low tide and is turning around, albeit slowly.'' Gateway Inc. (NYSE:GTW - news), which has been forced to retrench, pulling out of foreign markets amid fierce competition and slack demand, said it may have hit a turning point. The company, based in Poway, said it expects to maintain flat revenue in the second quarter, when computer sales to consumers typically decline. ``Momentum is starting to swing our way,'' said Chief Financial Officer Joe Burke. He cited a smaller than usual seasonal decline in the first quarter from the fourth quarter, which benefits from holiday sales, as reason to believe Gateway could continue to improve in the coming months. ``Historically, the fourth quarter to the first quarter is a 10 percent decline in unit sales. We're only down 5 percent. The second quarter is usually down 5 percent. We're saying it's going to be flat. That shows our value pricing strategy is working.'' Apple Computer Inc. (NasdaqNM:AAPL - news) said demand for its new iMac had not slowed, even after it raised the price by $100 to reflect higher components costs. Microsoft Chief Financial Officer John Connors said PC demand, which Microsoft had earlier estimated would fall in the mid-single digits in the June quarter, now looked like it would be flat or down only slightly, restarting growth after that. ``I wouldn't call it a robust recovery, but the direction is more positive than over the last 18 months,'' Connors said.

To: Night Writer who wrote (97229)	4/18/2002 7:32:16 PM
From: Elwood P. Dowd	Respond to of 97611

Gateway Meets Estimates; Compaq Does Even Better By Tish Williams Senior Writer 04/18/2002 05:44 PM EDT Compaq gave investors the luxury of listening to its quarterly report in a blissful state of relaxation. Back on April 8, the computer maker preannounced that it would beat Wall Street estimates of $7.6 billion and either meet or exceed analyst consensus of a penny a share profits. It was a welcome heads-up in a market that heard nothing good about IT spending in the first quarter. Thursday Compaq delivered with a wider profit and better sales than predicted. The company turned in $7.7 billion in revenue, as promised, and earned a net profit of $44 million, or 3 cents a share, according to generally accepted accounting principles. Excluding merger-related expenses, Compaq earned 4 cents a share. The finish represented a 9% decline from the fourth quarter's unexpectedly strong $8.5 billion in sales, and a 16% year-over-year drop from the first-quarter 2001's pre-slump $9.2 billion in revenues. Gross margins stayed steady from the fourth quarter of 2001 to the first quarter at 20.6%. Potential acquirer Hewlett-Packard (HWP:NYSE - news - commentary - research - analysis)announced a more complete set of preliminary proxy contest results Wednesday that showed merger approval edging out opposition by 40 million votes. Some votes still remain to be tallied, and the vote also depends on a lawsuit pending in Delaware Chancery Court in which H-P board member Walter Hewlett has accused CEO Carly Fiorina of improperly coercing Deutsche Banc into changing its vote at the last minute. Compaq contends that its results signal that its customers have not been put off by the uncertainty regarding the future of the Texas boxmaker. "We have not backed off an inch from making steady improvements to our business model," Compaq CEO Michael Capellas said in a statement. On the less fortunate side of the computer industry, troubled Gateway at least beat the Street with its $992 million in first-quarter sales, even though it made up a painful 55% year-over-year decline in revenue. Gateway met estimates with a 20 cents-a-share pro forma loss. Including $99 million in special charges, the company witnessed a net loss of 39 cents a share according to generally accepted accounting principles. Wall Street was expecting a 20 cents-a-share pro forma loss and $971.8 million in revenue. During its analyst meeting in late February, the cow-spotted computer maker announced its decision to forgo the profitability achieved in the fourth quarter and instead focus on regaining market share. To achieve that, Gateway initially slashed prices below those of industry leader Dell. This was regarded as a successful short-term move, though financially punishing, given Gateway does not share Dell's (DELL:Nasdaq - news - commentary - research - analysis) streamlined expense and distribution structure. According to Robertson Stephens analyst Eric Rothdeutsch, the company "eased off on its aggressive pricing in March," perhaps a signal that the losses involved in rock bottom prices were too drastic. Robertson Stephens has not done banking for the company. Gateway reported that average selling prices fell sequentially from $1,667 to $1,538 in the quarter, which allowed it to keep unit shipments high. Despite the typically slower seasonal environment of the March quarter, unit sales dropped only 5%.

To: Night Writer who wrote (97229)	4/18/2002 7:33:32 PM
From: Elwood P. Dowd	Read Replies (1) \| Respond to of 97611

Reuters Technology HP 'Terminates' One Leak Source, Hunts for Second By Peter Henderson SAN FRANCISCO (Reuters) - Hewlett-Packard Co. (NYSE:HWP - news) has fired an employee who leaked documents and is on the trail of the culprit who intercepted a controversial voicemail from Chief Executive Carly Fiorina about the Compaq Computer Corp. (NYSE:CPQ - news) merger, the company said on Thursday. The Silicon Valley stalwart HP has faced strong dissent within the ranks to management's $19 billion plan to buy Compaq, which sparked a nasty proxy battle as well as some leaks of confidential information and is now being fought in court. A number of HP employees attended a March 19 shareholder vote in a last-minute campaign against the deal, which would eliminate about 10 percent of the work force of the combined technology company. Fiorina told HP Chief Financial Officer Bob Wayman in a voicemail a few days before the shareholder meeting that they ``may have to do something extraordinary'' to convince two major shareholders to vote for merger. Federal prosecutors have since opened a criminal investigation into the vote. HP has adamantly denied any wrongdoing in the vote and launched an investigation into how the voicemail was leaked, concluding that the intruder had intercepted the voicemail without breaking or hacking into HP's computer system. ``We have concluded the voicemail was not obtained or forwarded from within the HP voicemail infrastructure,'' Fiorina explained. ``The message was intercepted from Bob Wayman's home or cell phone, or through unauthorized access to and use of Bob's voicemail password,'' she wrote. Spokeswoman Rebeca Robboy said HP had hired an outside investigator to help its technology team track down the leak, which was first reported in the San Jose Mercury News. Information security expert Kevin Mitnick, who is writing a book on voicemail security, said the intruder had probably guessed or seen Wayman's password, the easiest form of voicemail access. Intruders also trick administrators into giving out or changing the passwords or used a maintenance technical ``back door'' that allows administrators access to some phone systems. ``To track the call would be extremely difficult,'' unless the intruder used a phone linked to himself or herself to check Wayman's voicemail, he said. HP must defend its conduct on vote solicitation in court next week, but the company said that a preliminary vote count showed HP had won approval for the merger, which could close by early May. Fiorina also said that an employee had admitted leaking two memos. ``The employee has been terminated from the company,'' she said, urging HP workers to be vigilant and protect their passwords. ``I find all of this reprehensible, as I know you do,'' she concluded.