Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Andreas who wrote (57081)	4/12/1999 1:39:00 AM
From: E_K_S	Read Replies (1) \| Respond to of 97611

Hi Andreas - Didn't COMPAQ purchase a few Internet related companies for all cash during the previous quarter. I believe these companies will be consolidated into the new AltaVista product. Do you think a large portion of these costs were expensed this quarter (ie. one time charge) which may have accounted for lower overall margins. I believe also it was stated that some very large DEC related orders were anticipated to be booked this quarter but never materialized. They will probably will hit next quarter. These are higher end products with higher margins. Finally, the overall industry probably softened and to maintain market share end-unit prices were dropped and again margins suffered. My focus will be on the growth in Service revenues. I bet that this component of revenues did not grow as fast as estimated. It was mentioned on this thread that COMPAQ's goal was to generate 50% of their future revenues from high end servers and service revenues. These two type of revenue streams will generate the highest margins, and in fact differentiate COMPAQ from all the other box makers in the future (especially Dell). Maybe our management needs to look at a restructuring that provides our company a fast track to building their high end products and service consulting/maintenance business at the expense of their low end PC box business model. Perhaps this quarter reflects this on-going transition and once their (1) online PC build to order system and (2) JIT (Just-In-Time) manufacturing facilities are in place, their PC inventory management will be optimized and these obsolete inventory write downs will be behind us. Just some additional items to consider. COMPAQ's overall "new" business model needs to be laid out by our management (in detail!) so we (and Wall Street analysts) can track their performance based on specific key revenue (ie. by Service revenues and Enterprise Customer revenues) and manufacturing (ie. new facility inventory JIT management measurements) objectives. IMO, management still has a lot left to explain to this investor regarding how they plan to eventually structure the "new consolidated CPQ" company including the make up of these new revenue streams and exactly what is left to be completed. EKS

To: Andreas who wrote (57081)	4/12/1999 5:03:00 AM
From: rupert1	Read Replies (3) \| Respond to of 97611

Andreas: Mason warned as though the 15 cents was net earnings against net expectations of 32 cents. Therefore: I think all the potential one-time charges you listed would not be included in the 15 cents estimate. The exception might be inventory right-off, if this is just a fancy term for selling at or below cost. As I have pointed out before, the single one-time charge which might have been taken against net earnings would have been the cost of the Brazil Real devaluation. In February CSFB said that Mason gave figures that it might amount to as much as 2/3 cents EPS. But that would bring down the original estimate to 29 cents. How to explain the difference between 29 and 15? (Its probably going to be 17 cents eps). You mention higher costs. But in his Saturday comments, EP said it has met its cost reduction targets for the 1Q and cost-cutting is on track. If that is the case, costs should have improved over 4Q. As the story dribbles out, it is beginning to look like they lost 5% gross sales (some of it because of a boycott by angry re-sellers) and they cut prices so low to maintain their market share, which EP says they successfully did, that the PC division might have become a not-for-profit charity.