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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: WeisbrichA who wrote (109402)	3/13/1999 2:55:00 PM
From: Lancer	Read Replies (1) \| Respond to of 176387

TO ALL:Ligth and shadows - trading-ideas.com At the beginning of the quarter, Compaq believed that it could generate revenues of $10 billion during the quarter based on demand then and the level of inventory in the distribution channel. Compaq anticipated that small-to-mid size businesses would replace older PCs, which might not be Y2K compliant. As the quarter wore on, Compaq noticed that small businesses did not buy as many PCs as the company had expected. January was particularly weak both in Europe and US. While retail demand was strong, demand from small businesses contributed to the shortfall. Demand picked up slightly in February and remained firm in March, however, enough damage was done in January, which would lead to a shortfall for the entire quarter. Unless, sales pick up substantially in the next two weeks, Compaq would surely miss the $10 billion revenue that it was hoping to generate and this would lead to lower EPS. While Compaq would miss the revenue number, analysts believe that a sudden surge in sales plus cost cutting could enable the company to meet EPS. Also contributing to the shortfall is the delay in the launch of Pentium III, mentioned Mr. Mason, as companies might have delayed purchases of PCs until Pentium III was introduced. Although, Mr. Mason said that after the release of Pentium III, he did not see any substantial pickup in demand. As it stands, analysts believe that Compaq's current quarter is at risk, but they feel that results are likely to be better in coming quarters. Analysts are curious about the inventory level, which created problem for Compaq in the same quarter last year. Compaq finished the December-quarter with 3.9 weeks worth of inventory, which increased to 4.5 weeks at the end of January. Analysts' believe that not much has changed in the inventory levels since January and Compaq may have trouble getting rid of inventory. Already, several large PC distributors pre-announced earnings shortfall, but the primary reason for their shortfall was not lower PC sales, but combination of other factors, such as increased competition from direct PC sellers and so forth. But Micron Electronics and 3Com, which sells networking equipment used in PCs, warned of earnings shortfall due to sluggish PC sales growth. Dell and Oracle also reported lower sales growth. Combination of above factors clearly point to sluggish demand for PCs in the current quarter, which makes PC stocks vulnerable for the next few weeks until the actual earnings are reported and the quality of those earnings would determine where things stand. Analysts generally have a "hold" rating on Compaq. Regards- Luciano