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

To: E. Graphs who wrote (29195)	7/15/1998 1:08:00 PM
From: Uncle Frank	Read Replies (2) \| Respond to of 97611

cbs.marketwatch.com Analysts question second quarter progress By Binti T. Harvey, CBS MarketWatch Last Update: 12:38 PM July 15, 1998 Also see Tech Report HOUSTON (CBS.MW) -- Compaq Computer Corp. shares fell Wednesday afternoon as analysts decided its better-than-expected earnings came from its acquisition of Digital Equipment Corp., and not improvements in Compaq's main personal computer business. Compaq (CPQ) reported operating income of $32 million or 2 cents a share, compared to $257 million, or 17 cents a year ago. Analysts surveyed by First Call expected a breakeven quarter. Including a charge for the acquisition of Digital Equipment Corp., Compaq posted a net loss of $2.33 a share. Revenue increased to $5.8 billion, up 5.7 percent from $5.1 billion in the second quarter of 1997. Compaq shares fell 1 1/4 to 32 1/2 by Wednesday afternoon. It was a disaster all around," said Piper Jaffray analyst Ashok Kumar. "Without Digital, Compaq probably would've reported a loss of 10 cents a share," he said. Kumar noted that the company's consumer channel inventory remains between 5 and 10 weeks, although commercial channel inventory did fall in the last quarter. James Meyer, chief equity strategist for Janney Montgomery Scott, believes that while Compaq has made some progress on its inventory backlog, it likely won't see its old products cleared out for several more weeks. Meyer noted that while the company reported solid sales of its servers and workstations, its better-than-expected performance was primarily the result of Digital's strong enterprise server business. Nevertheless, Meyer believes the bottom line is most important. "I think they got more leverage for the Digital acquisition than from rosy PC sales, but what counts in the jingle in your pocket," Meyer said. Compaq said the third quarter will be "largely transitional," as it focuses on integrating Digital's products and services. Compaq said it's comfortable with third-quarter estimates of 12 cents a share. Ahead of a stronger retail season, with back-to-school and Christmas sales expected to boost profits, most analysts are adopting a wait and see attitude.