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

To: Claude who wrote (29308)	7/16/1998 3:38:00 AM
From: rupert1	Read Replies (3) \| Respond to of 97611

Thread: Another report on COMPAQ: (UPDATE) Compaq Slashed Inventories En Route To Decent 2nd-Quarter Showing Dow Jones Online News, Wednesday, July 15, 1998 at 13:24 NEW YORK -(Dow Jones)- Compaq Computer Corp. Wednesday posted a better-than-expected earnings performance for the second quarter that included a 5.7% revenue increase along with a steep reduction in personal-computer inventories. The world's top supplier of PCs reported a second-quarter net loss of $3.6 billion, or $2.33 a share, after charges for its acquisition of Digital Equipment Corp. Without those charges, it had a profit of $32 million, or two cents a share. Analysts surveyed by earnings tracker First Call had a break-even mean estimate. Revenue rose to $5.83 billion from $5.52 billion. The Houston-based company's second quarter included $3.2 billion for the write-off of purchased in-process technology, $291 million for restructuring costs related to Compaq employee separations and the closing of some Compaq facilities, and $139 million for other operating adjustments. A year earlier, Compaq earned $257 million, or 17 cents a diluted share. But Compaq's earnings were largely irrelevant to analysts, who were more concerned about the company's inventory and its integration of Digital. Chief Financial Officer Earl Mason indicated Compaq has taken care of inventories. Mason said inventories of commercial PCs dropped to three and a half weeks in the distribution channel - better than Compaq's stated goal of four weeks - as it slashed prices. Compaq's inventory had ballooned as high as 10 to 12 weeks of product at the end of 1997. Mason said he is "pretty happy" with the current level. The CFO said he expects retail inventories to increase by the end of August to prepare for the back-to-school buying season. Strong PC sales in North America and Europe offset a 15% sales decline in Asia, Mason said. North American sales rose 39% in the period, while European sales soared 46%. Industrywide, continued weakness in Asia, currency issues, PC inventory problems, and pricing pressures are just some of the woes that computer giants faced in the second quarter. Looking forward, Mason said he is comfortable with the current third-quarter mean estimate of analysts surveyed by First Call, which sees Compaq earning six cents a share. The company said that quarter will largely be transitional, as it focuses on integrating Digital's products. The company expects the Digital acquisition to boost earnings by the fourth quarter. Anecdotal evidence from corporate resellers and computer retailers that PC demand is picking up is leading some analysts to believe they must raise future earnings estimates. BancAmerica Robertson Stephens & Co. analyst Dan Niles said third-quarter earnings views may need to be adjusted north of the current range. But a boost in the estimate depends more on how well the company deals with its Digital integration, said Sanford C. Bernstein's analyst Vadim Zlotnikov. Mason also said Compaq has almost no debt and the company's goal of reaching $50 billion in sales by 2000 is "still very much intact." Compaq plans to lay off 17,000 people over the next year, with 15,000 of the cuts coming from Digital's operations. So far, it has eliminated 5,000 of those jobs and expects to save $1 billion after eliminating all 17,000. Copyright (c) 1998 Dow Jones & Company, Inc. All Rights Reserved. g