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

To: Elwood P. Dowd who wrote (26054)	5/12/1998 8:47:00 AM
From: Roads End	Read Replies (1) \| Respond to of 97611

Good morning EL..This is today's WSJ article. Cheap PCs, Recent Deals Cited for Lexmark's Gains By LISA BRANSTEN THE WALL STREET JOURNAL INTERACTIVE EDITION SAN FRANCISCO -- Plunging personal computer prices may mean tighter profit margins for PC makers, but it has been a boon for computer-printer firms -- and investors are clearly beginning to recognize that trend. Shares of Lexmark International Group gained 1 3/4 to close at 62 3/4, above their 52-week high, in composite trading Monday on the New York Stock Exchange. That rise came in the wake of news that the printer company had extended its agreement to provide supplies for high-end International Business Machines hardware until 2002. Meanwhile, the Nasdaq Composite Index dropped 16.30 to 1848.07, while Morgan Stanley's high-tech 35 index lost 9.85 to 580.54. While the IBM deal was good news for Lexington, Ky.-based Lexmark, analysts were hesitant to cite it as the driving factor behind Monday's gains, noting that business with former parent IBM isn't a growth area. They instead site an increasingly bullish outlook for the company's business at large. Recent growth in PC sales, driven in part by sub-$1,000 machines, has been positive for Lexmark because "there is one universal truth -- and that is that new computer buyers generally buy new printers," said George Elling, an analyst with Lehman Brothers Inc. Although he has a positive outlook for the company, he has the stock rated at "outperform" rather than "buy" because of its rapid runup. Shares of Lexmark had been rising steadily for about a year and surged 24% on April 20 after the company reported earnings that were well above analysts' expectations. For 1998, Lexmark shares are up 61%. Supplies for IBM products may account for as much as 15% of Lexmark's profit and a bigger chunk of its revenue, said Richard Schutte, an analyst at Goldman, Sachs & Co. He has a "buy" rating on the stock because it continues to gain market share on its biggest competitors, especially printer giant Hewlett-Packard. And Lexmark's agreement to ship three types of inkjet printers under the Compaq Computer brand name, should help them in that effort, he said. Lexmark runs a distant second to H-P in the laser-printer arena and is the fourth biggest supplier of inkjet printers. But analysts at market-research firm International Data Corp., Framingham, Mass., expect the company to continue to gain market share. "The deal with Compaq is going to put [Lexmark] in a situation where it will have access to more customers, many of whom they wouldn't probably be able to reach otherwise," said Keith Waryas, an analyst at IDC. "This is a move that is going to make them much more competitive with the top three" inkjet companies. Lexmark was the printer division of IBM until it was sold to investment firm Clayton, Dubilier & Rice in 1991. Shares were offered to the public in 1995. Monday's Market Activity Elsewhere in the tech sector Monday, SBC Communications fell 3 9/16 to 38 13/16, while Ameritech jumped 2 1/8 to 46, both on the New York Stock Exchange. SBC announced a bid to acquire fellow Baby Bell Ameritech in a stock swap valued at $61.8 billion, the largest ever in the telecommunications industry (see article). Excite fell 5 1/2 to 58 1/2 on Nasdaq. BT Alex. Brown cut its rating on the stock of the Internet portal site to "buy" from "strong buy" Also, OfficeMax said it will become the main on-line retailer of office products throughout several areas of Excite's site through a two-year sponsorship and marketing agreement. OfficeMax slipped 1/8 to 18 1/4 on the Big Board. Apple Computer rose 1/2 to 30 15/16 on Nasdaq. The computer maker said it will ship Mac operating-system version 10 in the third quarter of fiscal 1999, and interim chief executive Steve Jobs said the company is "back of track." (See article.) Seec fell 1 3/8 to 13 on Nasdaq. The software maker posted a profit of $961,884, or 17 cents a share, for its fourth quarter, reversing a year-ago loss of $383,065, or 12 cents a share. Revenue soared to $4.2 million from $819,830 a year ago, and Seec said it would use $1 million of that to purchase the assets of its affiliate and distributor in India. Seec, which makes software and systems used to maintain and redevelop computer programs written in the COBOL language, attributed the revenue surge to an 800% increase in software license and maintenance fees led to the revenue increase in the latest fourth quarter. Steve