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To: Sig who wrote (83715)	12/4/1998 12:25:00 PM
From: Zeem	Respond to of 176387

RESEARCH ALERT-Merrill sees Compaq on track December 4, 1998 9:32 AM EST NEW YORK, Dec 4 (Reuters) - Merrill Lynch analyst Steve Milunovich said Compaq Computer Corp. appears to be on track to make his fourth quarter earnings estimate of $0.35 per share, "with possibly slight upside." -- In a research note issued Friday, the analyst said he believes the stock is fairly valued, given that the company has much to do in integrating its acquisition of Digital Equipment Corp, which it bought in June. -- Compaq stock is up 10 percent this week, in part due to speculation that it could spin off Alta Vista, the Internet search engine business it acquired as part of the Digital deal, he wrote. Compaq has said in the past that it is exploring various options on Alta Vista. Compaq closed Thursday at 36-5/16. -- Based on an assumed revenue run rate of $150 million, Milunovich said a seven to eight times stock price-to-sales multiple would give Alta Vista a market capitalization of over $1 billion. -- He said further upside to his fourth quarter estimate is possible and most likely would come from lower corporate expenses from continuing layoffs planned for the quarter. -- Compaq is seeing good demand in both Europe and North America, the analyst said. Japan's commercial business is a bit better, though Asia Pacific as a whole is still not showing any signs of recovery. Business in Latin America is mixed. -- Retail personal computer sales, which account for 15 percent of total Compaq sales, are very strong; Compaq said it had record retail sales over Thanksgiving, he noted. -- If there's a weak spot it could be commercial PCs, which account for 24 percent of sales, Milunovich said. "We have heard that Dell and Hewlett are very strong in this market now," he wrote, referring to rival PC makers Dell Computer Corp. (Nasdaq: DELL) and Hewlett-Packard Co. (NYSE: HWP) -- The First Call consensus for Compaq's fourth quarter is $0.36 per share, compared to $0.42 last year. REUTERS