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

To: rupert1 who wrote (45953)	1/28/1999 7:21:00 PM
From: rupert1	Read Replies (2) \| Respond to of 97611

January 28, 1999 Compaq Posts 14% Rise in Earnings On Strong PC, Minicomputer Sales By GARY MCWILLIAMS Staff Reporter of THE WALL STREET JOURNAL Compaq Computer Corp., wrapping up a tough year for its personal-computer business, said earnings for the fourth quarter rose 14% on the strength of robust home-PC sales and a rebound in sales of Digital Equipment minicomputers. Net income rose to $758 million, or 43 cents a diluted share, from $667 million, or 42 cents a share, a year earlier. The results handily beat Wall Street's consensus of 37 cents a share, as compiled by First Call, but did so largely as a result of odd items: a reversal of previous write-offs and a sharp decline in its effective tax rate. "If you back out the valuation adjustments and tax, it was in line with expectations," said Piper Jaffray Inc. analyst Ashok Kumar. Compaq shares fell $1.75 to $47.50 in New York Stock Exchange composite trading in what analysts said was disappointment the results weren't stronger. Shares of the Houston computer maker have more than doubled since October's low of $22.93. "The stock was bid up with the expectation that they would seriously beat the estimate," said Warburg Dillon Read analyst Charles R. Wolf. Revenue was $10.9 billion, up 48% from the same period a year earlier. Revenue from Digital Equipment Corp., which the company acquired in June, contributed about $3.3 billion during the period, analysts said. Revenue was up 2% from the combined Compaq and Digital revenue posted during the fourth quarter of 1997, reversing a decline in the prior two periods. Earl L. Mason, Compaq's chief financial officer, said revenue benefited from strong PC sales, a pickup in minicomputers and a 10% jump in services business over the September quarter. Compaq said unit PC sales rose 31% and, in a sign that dealers are further reducing their inventories, said dealer sales to customers rose 43%. Gross profit margins fell to 26.4% from 27.5% a year earlier, prior to the acquisition of Digital. Analysts said the results indicate the company's PC margins continue to fall sharply. Margins on the acquired minicomputer and services businesses are more than twice that of its PC business. Mr. Mason said Compaq expects to match Wall Street's earning estimate of 35 cents a share in the current quarter and $1.78 for all of 1999. The company reported strong dealer shipments around the world. In North America, shipments by Compaq dealers rose 53% and increased 46% in Europe, Mr. Mason said. He attributed the strong dealer sales to companies updating their computers to handle the year-2000 bug. "I believe what you see is a lot of year-2000 [remedies] going on, especially in the Japanese enterprise market." Japanese dealers boosted shipments 51%, he said. A cost-cutting campaign continued to reduce operating expenses to 18.3% of sales from 23% of sales in the third quarter. The company has cut the combined Compaq-Digital employment by 13,500 in the last year, leaving about 70,665 employees. Inventories fell to three weeks of sales compared with 12 weeks a year ago.