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

To: kahunabear who wrote (20905)	3/9/1998 8:40:00 AM
From: Jurgen	Respond to of 97611

08:25 ET ******(from briefing.com) COMPAQ COMPUTER (CPQ) 26 5/8 CLOSED. No profits and revenues flat with year-ago. Not good. Compaq warned after the close on Friday that competitive pricing in the North American market has caused serious problems. Some Wall Street analysts are saying the Compaq pushed product to suppliers in the fourth quarter last year to keep yearly numbers up, and that suppliers are now overstocked, which will keep Compaq's sales to suppliers down. Somehow, they are putting a more positive spin on this than just saying that PC demand is lower. But either way, flat sales is a problem. After all, fourth quarter sales were up "just" 23%," which was down from 27% in the fourth quarter of 1996. If Compaq was "stuffing," it barely brought the sales numbers up to what the market felt was acceptable, and now they are paying the price. Equally as likely is that the sub-$1000 PC market is starting to hurt Compaq. That would be consistent with the CFO's comments late last week about competitive pricing pressures. Any way you cut it, however, something is wrong, and flat sales for the first quarter, down from 14% in 1996 first quarter and 56% in 1995, shows a serious slowdown. Compaq says that as a response, it will plan price cuts and promotions through the second quarter and that the outlook for the second quarter is cautious. Of course, the company also plans to acquire Digital Computer (DEC), but these numbers suggest management should worry more about the core business before trying to conquer, and turn around, new fields; especially at high premiums for DEC stock. Merrill Lynch has downgraded that stock for the second time in a week, but DLJ has upgraded to "strong buy" and suggests buying on weakness. Give them credit for courage.