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

To: rupert1 who wrote (50404)	2/28/1999 5:41:00 AM
From: Mao II	Read Replies (1) \| Respond to of 97611

victor: I'm not great at charts, but if you look at CPQ's, the 35 area seems to be where there was substantial resistance immediately prior to the October 98 slide to the low, and again, digging out of the hole. If my read is correct, it seems to me that a further dip presents a substantial opportunity. Lemme add, however, that Kenya has now managed to get me all hot and bothered about a possible INTC warning. If that happens we are up a creek, in my humble opinion. The only consolation is that we will have oodles of company. Well, as the Chairman liked to say, Learn from adversity. What do you think? M2

To: rupert1 who wrote (50404)	2/28/1999 7:00:00 PM
From: Night Writer	Read Replies (3) \| Respond to of 97611

victor, Institutional buying appears to be right at the 20 PE for $1.75 earnings. I heard the long bond was somewhere above 5% on Friday. I wonder if there is any correlation in the institutional buyer's mind. I still think Compaq could make $1.875 to $2.00 this year. I made some brief notes on various articles to help my thought process on Compaq. 1. PIII introduction in late February and should impact March sales. This will also boost sales for the year. People in the market for a new computer have delayed purchasing either to buy the P III or pick up the last generation chip at a discount. 2. Brazil devaluation a minor negative impact. Less then 1% of sales. 3. Inventory under control. (Compaq even recognized as best inventory control on laptops.) Channel stuffing is out of the question. Last year it was more of an overly optimistic sales projection on commercial products then calculated stuffing by management. Contracts with VARs gave too much price protection on their inventory. This have been corrected so that VARs share the pain of too much inventory, and this encourages the VARs to closely monitor their inventory. 4. January is always a slow month for North American and European business. Managements are busy reviewing prior year results. They are making adjustments to this years budget and plans based on the prior year results. Also may be some delay for the P III chip. 5. Y2k is still a factor. However, it should not be a great factor with large institutions. Financial institutions had to have the bug fixed before December 31, 1999. The companies that have the bug fixed now have IT budgets that permit updating some hardware. They delayed updating hardware to fix the software problems. The companies that have not completed fixing the bug may need outside services to accelerate the fix schedule. 6. $1.875 earnings produces a $37.50 stock price with a 20 PE. I still think Compaq could earn $1.85 to $2.00. The warning about this quarter being back loaded was a wise move after last year. Compaq Management wants to retain the Street's confidence and advise of any potential problems as soon as possible. The way I understand this, it is is a potential problem at this point and not a real problem. Compaq could still make the number this quarter. In fact this could avoid the pre earnings run up and sell off. It might turn the earnings announcement into a buying event rather then a selling event. 7. Asian sales are picking up to the extent that "strong demand" is used to describe sales. I have heard that Asia is behind on fixing the Y2k problem. Perhaps this along with some minor economic recovery will off set some decrease in sales elsewhere. I don't think there is a major economic recovery in Japan, but Korea seems to be doing well. China could furnish a great market. (I know, duh what's new.) 8. Digital integration on track. 9. Services are doing well. 10. High end servers and work stations doing well. 11. Compaq's move to deal with Etailers on price and announcement of new products. Yes, it is a surprise that this hasn't already been dealt with given Compaq's interest in the Internet. Maybe, they are the first to focus on the etailer situation and drew a lot of attention so that others would do something also. Maybe they are leading in this area by being so open about it. It is my personal opinion that Compaq benefits from having their products sold by a wide variety of distributors. This includes etailers, retailers, VARs, and Compaq direct. One thing did cross my mind about the etailer having a Compaq product not yet on the market listed for sale. This type of activity is normal in the gaming market. Etailers list games not yet released for sale. Gamers put their order in for the game. Etailers have better knowledge about the number of games they need when ordering the game on it's release. The game is shipped as soon as the etailer has the game. It works to the benefit of the etailer, game company, and the customer. Perhaps this move by Compaq could result is something very different from the original intent. After all, how many times has a sales clerk alerted a customer that a new product model is coming out in the near future, or the product will be on sale next week. The customer returns on the given date to buy the product. The customer also returns to the store because of the excellent service. This is the etailers way of doing the same thing. 12. Compaq is in an embarrassing situation with AV. They need to do something positive with the AV IPO, or spinoff. However, it is going to take some time to do it right. 13. The large cap companies are high. The small cap companies are low. The market is nervous about the valuation of large caps in general. Any negative news creates a sell off. After watching what happened to Dell over the past three weeks, many small Compaq investors choose to get out fast. Institutions may be taking the opportunity to pick up some trading dollars. That or some decided to sell while others are buying. Bottom line, I holding this stock. I may pick up some more shares tomorrow. Depends on the status of the puts I sold. I may not have to buy any stock if they have been put to me. I think Compaq is a bargain at anything less then $40 this year. NW