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

To: gordon rundle who wrote (25216)	4/29/1998 6:28:00 PM
From: Intel Trader	Read Replies (1) \| Respond to of 97611

Compaq overcoming backlog woes But Street isn't hearing bright message, analysts say By Binti T. Harvey, CBS MarketWatch Wed Apr 29 16:45:57 1998 LOS ANGELES (CBS.MW) -- As Compaq turns the proverbial corner in regaining control of its sluggish inventory, the giant manufacturer of PCs may be about to reap the rewards of its aggressive measures to move its product at respectable prices. Trouble is, many investors -- along with the analysts who guide them -- may be clueless about it. In the past two weeks, Compaq (CPQ) has received its fair share of press about its strong market position. International Data Corp. and Dataquest said Compaq retained its No. 1 slot in the U.S. and international markets in the first quarter as its market share grew about 4.5 percent. Pfeiffer's lost message And Chief Executive Eckhard Pfeiffer has been telling anyone who will listen that the company is making progress toward reducing its inventory backlog to two to four weeks by the end of the second quarter. Much of that positive publicity, however, seems to be lost on Wall Street. Compaq shares have languished in a narrow range, between $25 and $30 a share. On Wednesday afternoon, the stock edged down 3/16 to 27 1/2. But Ashok Kumar, a Piper Jaffray analyst, says Wall Street may be missing out on notable comeback. Last week, Kumar scrambled to boost Compaq's rating, upgrading the shares to "aggressive buy" from "neutral." Compaq has increased its third-quarter orders for Intel microprocessors, Kumar says, a move that reflects confidence inventory will return to normal levels by that period. Average selling prices Sales figures tell the story, according to Kumar. Average selling prices, which fettered revenue growth in the first half of the year, resulted from Compaq's own inventory mismanagement, he said. As inventories fall back in line with demand, Kumar expects average selling prices to rise to about $1700 -- vs. about $1400 at their lowest levels. Analyst Richard Chu of Cowen & Co., who rates Compaq a "buy," agrees with Kumar. "The excess inventory was their own doing, but they're taking their medicine," he said. "They'll take some hard hits to sales in the second quarter, and they'll go forward from there." Kumar asserted that the stock should jump in the second half, lifted by the anticipated upturn in average selling price, coupled with Compaq's sustained unit shipment growth. "Compaq is grossly undervalued relative to others in the group," he said, "but the resumption of revenue growth plus the completion of the DEC (DEC) deal should push the price up to more appropriate levels." Compaq is in the throes of acquiring Digital Equipment Corp. $40 price target Kumar has established a 12-month share-price target of $40, and urges investors to get while the getting is good. He believes the stock is poised for an upswing, despite the market's lukewarm response to changes at the company. And what are the other analysts saying? BancAmerica Robertson Stephens maintains its long-term "attractive" rating on the company, Merrill Lynch has the stock rated "neutral." At Bankers Trust Alex. Brown, it's a relatively unglamorous "market perform." To be sure, uncertainties remain about the company's outlook. The ramifications of the DEC acquisition, slowing growth rates for the industry and questions about the success of the company's new inventory management model all pose risks for Compaq going forward, Chu noted. Nevertheless, he's optimistic. "Looking at the dynamics and the fundamentals of the company, I'm still positive," Chu said. "I would say it's not a bad time to buy."