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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Richard Russell who wrote (26499)	3/8/1998 3:13:00 AM
From: Richard Russell	Read Replies (1) \| Respond to of 132070

Technology News Sat, 7 Mar 1998, 6:05pm EST BN 3/6 Tech Shares Expected to Fall After Compaq Warning (Update1) Tech Shares Expected to Fall After Compaq Warning (Update1) (Adds details in 4th and 8th paragraphs.) New York, March 6 (Bloomberg) -- Technology stocks are expected to fall Monday in the wake of Compaq Computer Corp.'s warning it will ''roughly'' break even in the first quarter, hurt by excess inventory and price cuts on personal computers. ''Technology shares will get blasted on Monday -- anything PC-related,'' said Duane Eatherly, technology analyst at Banc One Investment Advisors, which owns Compaq and other tech stocks. ''The flood gates are open now. Anybody can pre-announce without embarrassment after Intel, Motorola and Compaq.'' The announcement was a shock to analysts, who had expected the world's largest personal computer maker to earn 35 cents a share during the quarter, according to IBES International Inc. Compaq joins Intel Corp. and Motorola Inc. in what will likely be a parade of technology companies bearing bad news. Intel's alarm Wednesday roiled tech stocks, and they're expected to tumble again next week now that Compaq has made its own troubles known. If such dominant companies are struggling, others surely are as well, investors said. ''Next week there's going to be a lot more of these,'' said William Schaff, chief investment officer of Bay Isle Financial Corp. in San Francisco, which owns some Compaq shares. ''It's obvious there's something going wrong when you have three of your biggest companies pre-announcing'' poor earnings. Shares Slide Compaq shares fell as low as 25 3/8 in trading after the stock market closed. They had risen 1/2 to 27 5/8 during regular trading. Compaq issued its warning after the market closed. Intel shares fell as low as 76 3/4 after the Compaq warning. Intel rose 2 9/16 to 78 1/8 in regular trading, recouping some of the 13 percent loss it suffered Thursday after its own profit warning. Compaq rival Dell Computer Corp. fell as low as 130 in after-market trading after rising 6 5/8 to 138 1/2 today. Some money managers are benefiting from the tech stock decline by selling the shares short. In a short sale, an investor sells stock he doesn't own at the market price in anticipation of a drop in price. The investor then borrows the shares and buys them after they drop, profiting on the decline. ''We think Compaq is a very good company, but there's been too much of a mania among a lot of these tech stocks,'' said Morton Cohen, a fund manager with Cleveland-based Clarion Partners LP who has been shorting Compaq for about a month. ''Expectations are too high given all the problems you've got in the world.'' While computer dealers and distributors are saying PC demand -- while not off the charts -- is decent, the warnings from high technology's symbiotic pair of Intel and Compaq is bound again to raise ominous questions about PC sales. Because Compaq is Intel's largest customer at around 8 percent to 10 percent of Intel's revenue, its woes are a ''substantial'' part of Intel's revenue shortfall that it disclosed late Wednesday, analyst Eatherly said. Intel cited across-the-board weakness for its microprocessors used in PCs, while Compaq has said it suffered in the first quarter from excess inventory, prices that fell faster than it anticipated and weak demand in the North American corporate market. Analysts also expect Compaq's actions to have ripple effects throughout the PC industry as other manufacturers will have to cut prices to stay competitive. Already, International Business Machines Corp., Dell Computer Corp., Micron Electronics Inc. and Toshiba Corp. have cut prices on some PCs. ''Until we are able to get some more articulation on the drivers of the shortfall, I would say the declines (in technology stocks) are warranted,'' Eatherly said.