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

To: rupert1 who wrote (57889)	4/14/1999 1:33:00 PM
From: rupert1	Read Replies (1) \| Respond to of 97611

April 14, 1999 -------------------------------------------------------------------------------- Compaq 1Q Warning Doesn't Faze Some Big Customers By BOB SECHLER Dow Jones Newswires HOUSTON, Texas -- Compaq Computer Corp.'s (CPQ) recent earnings warning torpedoed its stock, roiled the technology sector and forced its chief executive to discuss the issue at the start of the company's high-profile, biennial conference. Aside from igniting concern on Wall Street, however, the warning apparently has done little to affect the attitude of some of Compaq's existing corporate clients, several of whom said they've got no qualms about Compaq's long-term prospects or about continuing their business relationships. "They're a big firm - they'll still be around," said Brian Welch, data processing manager with Nationwide Insurance in Columbus, Ohio. Welch, whose company uses Compaq servers, was among more than 4,000 representatives of Compaq's corporate customers to converge here this week for the computer maker's Innovate Forum 99 conference. Not everyone in attendance was so forgiving. Kim Lew, a technology analyst for the Ford Foundation in New York - which owns an estimated 700,000 Compaq shares - said she's disappointed Compaq hasn't provided a good explanation for the sheer size of its projected earnings miss. Compaq issued an extremely negative first-quarter earnings warning late last Friday, prompting its stock to fall more than 22% Monday and providing an embarrassing sub-text to a event it had planned weeks in advance. The company said after Friday's market close that it would miss analysts first-quarter earnings projections by more than half, coming in around 15 cents a share instead of a First Call consensus of 32 cents. "I came here (to the conference) specifically to get a sense of why that miss happened, because that miss is not a small one," Lew said. "But they're not saying anything." She dismissed most of the company's remarks during the conference as "fluff," including those unrelated to first-quarter earnings. Conference Designed As Showcase Compaq's conference, held every two years, essentially is a series of sales pitches for Compaq products and services. The focus this year has been the Internet and strategies for businesses to adapt to it. The company's executives are conducting breakout sessions on various business services and strategies with attendees. A series of luminaries from Compaq's strategic business partnerships, such as Microsoft Corp. (MSFT) Chairman Bill Gates and Intel Corp. (INTC) Chief Executive Craig Barrett, were invited to speak as well. But Compaq officials also felt a need to broach the controversy surrounding its extremely negative earnings forecast, if only because of the reaction on Wall Street and to appease the more than 200 media representatives in town for the conference. Chief Executive Eckhard Pfeiffer devoted the initial remarks of his keynote address to the issue Tuesday, a speech intended to highlight his company's new Internet initiatives. "This will not slow us down," Pfeiffer told the crowd. "We fully intend to expand our business and grow market share profitably in 1999." Pfeiffer offered no explanation for the projected earnings miss during the speech, but he previously has blamed increased competition and lower-than-expected demand for Compaq's most profitable PCs. Many conference attendees said they were surprised to hear the size of the gap between Compaq's earnings projections for its first quarter and the expectations of analysts. Compaq won't officially report its first-quarter numbers until April 21. But several of the company's customers said its earnings will have no bearing on their own business plans. "As a customer, that doesn't make any difference to me," said Welch, of Nationwide Insurance. "To me, that's almost immaterial." Mike McCaffrey, of Bechtel Corp. in California, agreed. His company also buys Compaq servers. "The PC industry, in and of itself, is a very low-margin business," McCaffrey said. "I'm not concerned about it. Compaq has a good strong product line, and we're not concerned at this point with their financial stability." -Bob Sechler (512) 236-9637