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

To: Elwood P. Dowd who wrote (54184)	3/19/1999 6:31:00 PM
From: Jimbo Cobb	Respond to of 97611

Better yet, pass the Bar-B-Q sauce and eat some PIG !!!! If you can't beat 'em, EAT 'EM !!!!!!!!!!!!!!!!!!!!!!!!! jajajajajajajaja YES !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Jimbo.

To: Elwood P. Dowd who wrote (54184)	3/19/1999 6:39:00 PM
From: Jimbo Cobb	Read Replies (1) \| Respond to of 97611

Looks like CPQ is ready for another leg down...see ya at $28.... jajajajajajajaja Jimbo.

To: Elwood P. Dowd who wrote (54184)	3/19/1999 6:40:00 PM
From: rupert1	Read Replies (1) \| Respond to of 97611

El: MacDonalds are market-testing Italian chicken and Chinese pork burgers - but CROW! I'll mention that to them!

To: Elwood P. Dowd who wrote (54184)	3/19/1999 7:37:00 PM
From: my2centz	Read Replies (1) \| Respond to of 97611

To the board... In trying to analyze Compaq's income stream, I'm looking for the breakout of their product sales that come from the DEC acquisition. Specifically, I think that would be their Alpha servers. Here's my point: Looking at the robust revenue numbers from December, I tried to break them down into DEC product sales, CPQ product sales, and services. From CPQ comments and other company comments, and the IDC press release, I tried to extrapolate the most at risk segment of revenue. Obviously the SMB pc sales. If we agree that Service Revenue will grow sequentially 4Q to 1Q, that would provide a base of 1.9 billion in revenue (sequential growth of $200 million, matching the 3Q vs 4Q dollar growth). Additionally, what about the impact of DEC product sales. These would seem to be, by definition, not materially influenced by the SMB slowdown. Rough estimate of this segment is 1.8 billion (my guess/analysis March 97 DEC product sales * 4.9%). In this scenario, PC sales must make up 6.1 billion in order to meet the 9.6 billion target. Is that doable? It should be. Based on IDC's estimate of 4.9% dollar growth 98 vs 99, Compaq would do 5.97 billion in 1 Q 99 vs 98, with no increased market share factored in. This totals to 9.67 billion for 1Q. Now, at 9.7 billion, can they really make $.30+. Lets look at the fixed costs of overhead and R&D. $1.939 billion in 4Q, down $90 million from 3Q. They absolutely must lower this number. Assuming a mild reduction, lets say $1.894 billion for 1Q99. Total Gross Margin for 3Q was 24.8% and 4Q was 26.4%. Product GM was 23.5% and 25.5%, respectively. Service Margin was 31.4% and 31.1% respectively. Using GM of 23.5% for products (reflecting 3Q level, as to not overstate the efficiencies earned on greater volume in 4Q) and 31.1% for services reflecting the tighter 4Q margin, total GM $ would be $2.417 billion. GM less $1.894 billion overhead is .523 billion pre-tax. Now, who knows what kind of tax rate CPQ will use. Had they been consistent 3Q vs 4Q, 4Q earnings would have been $.05 less than stated. Anyway, CPQ has to make .539 billion AFTER-TAX in order to hit $0.30. In order to hit $0.30 at the 4Q tax rate of 18.669%, EBT has to be .663 billion. In my analysis, they are .14 billion short. However, I would expect additional overhead savings, as I believe certain sequential overhead savings realized from 3Q to 4Q are masked by the tremendous volume of 4Q sales. In final analysis, I hope that this shows one thing. Compaq's current model is heavily revenue dependant. It is very logical to think that the company really doesn't know what kind of quarter they are having. Between 9 billion and 10 billion, every dollar counts towards covering their fixed costs. The 4Q windfall was due to eclipsing the 10 billion mark, thus generating incredible GM and also the reduced tax rate. Just a simple analysis.........my2centz

To: Elwood P. Dowd who wrote (54184)	3/20/1999 7:39:00 AM
From: rupert1	Read Replies (1) \| Respond to of 97611

El: The earnings estimates I or anyone posts here are "irresponsible" in the sense that we are not accountable to anyone but ourselves. In the unlikely event that anyone is influenced by my prediction of 38 cents, let me explain my flimsy rationale. CPQ was comfortable with 35 cents. It has never changed its guidance. I assumed that it expected to exceed by at least 5 cents i.e. 40 cents. Given its cautionary words that unless March compensates for the slowdown in the first six weeks its private target might be missed by 1 cent, and given its garbled guidance on the Brazil devaluation which could be a one time charge of 2 cents, I assume that its private target is now 37 cents. Analysts predict a range from what, 20-35, (does anybody know what the exact top end of the range is?) and the "average" is now reported to be 33 cents. My 38 would still give CPQ its 5 cents surprise. The Club Thread, which was more optimistic and more accurate than this thread in 4Q, is ranging between 29-40, when I last looked, and I think its average is about 34. I cannot enter into the composition of the original analysts average of 35 cents (assumed private 40 cents). I don't know how much of it, if anything, was related to tax credits. *Lynn has brought to my attention that on p 45 of the Annual Report, there is a commentary which could be interpreted to mean that there is still $2.9 billion available in tax credits,* but a further note to the effect that the general tax rate might rise from 15% to 32% as between 1998 and 1999. This is further complicated by a tax holiday available to that proportion of production which emanates from the Singapore plant. So what effect will taxation have on the bottom line? At first sight $2.9 billion would appear to give the company lots of scope to meet the target figures. But whatever the effect of taxation, analysts will be looking at underlyng operational results and forward guidance. Calculations based on comparisons are made difficult by (a) the unusual conditions applying in 1Q 1998, when the company was trying to shift a backlog of inventory, virtually at cost and (b) by the surge in sales in 4Q, which may or may not have been boosted by YK2 purchases brought forward (c) by the organic, structural change within CPQ whereby efficiencies from the DEC merger are just coming on stream in full force and revenues from high-end products and from services are growing as a proportion of the whole. The theme running through many posts (and some journalistic analysts) is that CPQ cannot be trusted and that it - or some analysts - know some deep dark secret, probably involving channel stuffing, or shortfalls in orders etc. If that is the case then prediction is pointless. We can only proceed on what we are told or what we can infer by reasonable deduction from what is known. I assume that CPQ is truthful, otherwise I would never have invested in it in the first place. Nor do I believe that a company is incompetent that is No. 2 in computing after IBM and will have moved from $30 billion to $50 billion revenues in about 2 years.