Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: neverenough who wrote (20633)	3/8/1998 3:23:00 AM
From: ed	Read Replies (2) \| Respond to of 97611

The CPQ's inventory problem probably is caused by aggressive prediction, and nothing to do with the market. I do not understand why CPQ blame the invenory to market while other box makers all said market is in good shapes and are promising about the future. But how can PF admitted in public that the inventory problem is caused by CPQ's over and aggressive prediction.So, blame on the market onditions. Just like last quarter , all CEOs blamed the loss on Asian financial crisis, and things proved not.

To: neverenough who wrote (20633)	3/8/1998 3:28:00 AM
From: michael c. peterson	Read Replies (3) \| Respond to of 97611

Nigel, You left out one important point.Compaq PCs are CRAP.Now that the truth is out about them being a scam company corporations will take a closer look at the lousy product they have been buying.IMO MP

To: neverenough who wrote (20633)	3/8/1998 9:14:00 AM
From: Paul Brimhall	Respond to of 97611

Nigel, I agree that Compaq is No. 1. I believe Compaq is a great company. However, it is not so simple to just blow out millions of dollars of boxes at bargain rates. Dell has chosen not to compete in the sub $1K category. Compaq will be hurting NEC/Packard Bell, HP, IBM and the others more than Dell. However, Dell will probably feel it--but more in share price than anything. When any manufacturer "blows out" anything they are losing potential profits forever as well as hurting marketing momentum that they have spent millions to build. To use an analogy: When you go into McDonald's and see all of those hamburgers sitting there waiting to be eaten, Mickey D's management is saying, "based on past sales history, we bet that X number of people will arrive in the next 10 minutes to buy those hamburgers". Every minute that passes those hamburgers are losing value. When the people don't show up, McDonald's has to throw away the food. They don't run to the phone and call their accountant and ask for a "write off". The lost food simply increases the percentage of Cost of Goods Sold that shows up in the next income statement. Likewise, computers are "perishable". Every day they sit, they lose value (re: Moore's Law) and when Compaq estimates inventory at quarter-end they have to value those computers at their current valuation levels (its not that simple but it will catch up to them.) When they "channel stuff" which they obviously have been doing, they are offering discounts as incentives for companies like Insight, or MicroAge or maybe BestBuy to take the computers. You have to realize that the last dollar made on a computer IS the profit. Those discounts translate directly to the bottom line. When you are running a business with a net income of just 7.5%, it is tough to take discounts and show a decent profit. (For comparison look at these profit margins: Dell 7.7%, MSFT 29%, CSCO 18%, INTC 27%.) This is a painful thing for Compaq. It really distracts from what they are trying to accomplish short-term. Long-term it will just show up as a dip on the chart. Regarding your statement "start out fresh". I don't think so. Momentum is very important to attitudes within the company. And, so many of these management types are compensated with stock options that it kills them to see the stock tank like this. It will however, help Eckhard weed out the ones without "a sense of urgency" and give a new sense of urgency to the acquisition process. The shareholders will demand it. I will be buying CPQ at these prices because it is a great company and will be fine long term. Thanks, Paul