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

To: PCSS who wrote (38721)	12/4/1998 11:39:00 PM
From: PCSS	Respond to of 97611

Haven't seen this posted yet from street.com ********************** In the PC business, it's all about inventory -- especially during the holiday season. Last year at this time, Dan Niles, at what was then BancAmerica Robertson Stephens, presciently warned investors that Compaq's (CPQ:NYSE) inventory channel would back up. He was proved right as PC makers slashed prices to unload inventory. Now it's the all-important holiday season once again, and PC companies have already placed their bets on strong demand from consumers. Compaq's prospects look good, explains Niles, who is still TSC's ax, though his firm's name has changed to BancBoston Robertson Stephens. (The firm has done no underwriting for Compaq.) "Given all the debate on whether Compaq can get it together, we are starting to see momentum build in the fourth quarter," says Niles, who upgraded Compaq from a buy to a strong buy Thursday. He argues that PC average selling prices "are flat to up" in this quarter, and November proved to be a record month of production for the Houston-based company. Compaq's stock is up 17% since Tuesday. Shares were up 1 11/16, or 4.6%, at 38 1/16 Friday. Unlike last winter, when the industry had what Niles calls a "recipe for disaster" -- rapidly declining PC prices combined with lower demand due to the Asian contagion -- there is now an undersupply throughout the channel. PC vendor Tech Data (TECD:Nasdaq) reported Tuesday that it is having problems getting its hands on enough boxes. "I'm pleased as heck that they are having shortages," exclaims Niles, noting that Tech Data is very close to the customer end and thus has a good read on demand. This also should help Compaq's first quarter, Niles explains, because customers won't be able to get PCs until 1999. For PC companies, the first quarter is traditionally much slower than their fourth quarter. Niles predicts Compaq will earn 40 cents a share in the fourth quarter, somewhat below last year's 43 cents a share but above the consensus estimate of 36 cents. "This is a pretty tough quarter for Compaq, but I wouldn't have upgraded the company if I didn't think it was having a great quarter," Niles said. *************** Michael