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

To: Elwood P. Dowd who wrote (36563)	11/14/1998 11:35:00 AM
From: Roads End	Read Replies (1) \| Respond to of 97611

EL...In today's Barrons. There was another mention of CPQ but only that EP would be speaking Monday at COMDEX. Steve Dell partisans were miffed that the market didn't rejoice over the company's 65% increase in third-quarter profits, reported late Thursday. Dell fell 5 1/4 Friday, to 63 15/16, after hitting a record 73 1/2 Thursday in the hype leading up to the earnings news. For the week, the computer maker dropped 1 3/4 . Dell's current predicament is that it boasts the highest price/earnings multiple of any large company in the S&P 500 but lacks the monopolistic advantages of a Microsoft. Dell trades at 60 times projected 1998 profits, exceeding mighty Microsoft's 54. Given its gargantuan multiple and a market value that briefly broke the $100 billion mark Thursday, Dell is vulnerable to any sign of slowing growth and to evidence that rivals like Compaq Computer and Hewlett-Packard are becoming more competitive. Dell's profits of 28 cents a share, while beating the official consensus of 27 cents, didn't hit the "whisper" number of 30 cents. Moreover, revenue growth slowed. Another issue raised by some investors was the jump in the "other assets" on the company's balance sheet, to $680 million from $394 million in the August quarter. This reflected a tax credit related to large profits realized by Dell insiders, including CEO Michael Dell, on option-related sales of stock. Dell employees took $1 billion in option-related profits in the company's third quarter. Dell's critics argue that the company is effectively compensating its employees with stock options rather than cash and thus avoiding having the expense show up on its income statement. This same argument is leveled at Microsoft. Dell has been the greatest momentum stock of all time. It tripled during 1997 to lead the S&P 500 and has tripled once more in 1998 to again top the S&P, an incredible back-to-back feat. It'll be interesting to see if Dell's monster run is finally coming to an end.