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

To: Elwood P. Dowd who wrote (27494)	6/11/1998 9:38:00 PM
From: William Hunt	Read Replies (2) \| Respond to of 97611

ELWOOD --- THE 5.4 billion charge is real ---Compaq to Take $5.4 Bln in Charges for DEC Purchase (Update1) Bloomberg News June 11, 1998, 5:28 p.m. PT Compaq to Take $5.4 Bln in Charges for DEC Purchase (Update1) (Adds details, comment from Compaq CFO, analyst comment.) New York, June 11 (Bloomberg) -- Compaq Computer Corp. said it plans to take $5.4 billion in charges for its acquisition of Digital Equipment Corp., plus an unspecified charge for a restructuring that includes 2,000 Compaq job cuts. The Digital charges include $2 billion for cutting 15,000 jobs and $3.4 billion for writing off research and development. Analysts and investors who attended a meeting about Compaq's plans said the restructuring charge may be as high as $2 billion for trimming Compaq jobs and facilities, and could include the write down of some excess PC inventory, though Compaq said that charge will probably be less than $2 billion. Compaq, the No. 1 PC maker and now the world's second- largest computer maker behind International Business Machines Corp., has been struggling as demand slows and PC prices fall. As the company completes its $9.1 billion purchase of Digital, investors are looking for signs that Compaq can successfully integrate the two companies, keep key Digital customers and get its own business back on track. ''I'm hopeful. Compaq has better management than Digital and it can potentially do a whole lot more with the technology and the customer base,'' said portfolio manager Lisa Rapuano of Legg Mason Inc., which owned 3.8 million shares of Compaq and 2 million shares of Digital before the acquisition. ''But I haven't seen Compaq get their own house in order yet.'' The company shipped too many machines to dealers and distributors late last year, and then got stuck when PC demand waned. The weaker-than-expected sales erased Compaq's profit in the first quarter. At the meeting today, Compaq reiterated its plans to reduce PC inventory to four weeks by the end of this month. ''At one time I was worried that we would have too much Compaq inventory and too much Digital inventory -- I am not worried about that now,'' said Compaq Chief Financial Officer Earl Mason. Mason said any inventory write-down will be ''small,'' and the company will disclose specifics of the restructuring charge when it reports second-quarter results July 15. Houston-based Compaq also reiterated that it expects to break even before charges in the second quarter. The company said it expects the Digital business to start adding to earnings by the fourth quarter, and analysts estimate the company can save $2 billion to $2.5 billion from combining the two companies. Lack of Detail Still, analysts and investors said they didn't get as many details as they would've liked from the meeting, and the successful integration of the companies, continued management of inventory and retention of important customers will determine how successful the transaction will be. ''This all sounds like a good plan, but it's still wait and see,'' said analyst Daniel Kunstler of J.P. Morgan Securities, who rates the stock ''market perform.'' Following the acquisition, Compaq will have about 67,000 employees, after the 15,000 cuts at Digital and 2,000 at Compaq. Intel Corp. also is taking 2,000 employees with its acquisition of Digital's Alpha microprocessor business. ''The Compaq job cuts were unexpected. It's icing on the cake in terms of cost reduction.'' said analyst Mark Specker of SoundView Financial Group, who has a ''buy'' rating on the stock. ''I think things are getting better.'' Compaq also told analysts it has a new logo and will soon unveil a branding campaign that focuses on the ''Q'' for quality. BEST WISHES BILL

To: Elwood P. Dowd who wrote (27494)	6/11/1998 9:48:00 PM
From: John Koligman	Respond to of 97611

Elwood: Digital shareholders did not accept the acquisition quietly. Several current and past employees rose to express their anger towards senior management at the relentless downsizing the company has endured in recent years. ''We are here to warn future management and shareholders that employees are sick of layoffs and ready to fight for their jobs,'' said Derek Lee, to the cheers of the crowd. Lee, who spoke on behalf of Digital's 20,000 European workers, warned of looming ''social unrest'' if Compaq lays off additional workers in Europe. I liked the part about 'social unrest', can we implement this for the stockholders and get EP's attention??? John <ggg> PS - I realize these guys are upset over 20,000, but I wonder if they have any idea how many got the boot at IBM in the late '80's and early '90's....