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

To: Windseye who wrote (58885)	4/20/1999 9:17:00 AM
From: Kenya AA	Read Replies (1) \| Respond to of 97611

Pfeiffer Made Life Tough For Wall Street: Analysts Lack Of Trust, Execution Cited In Pfeiffer Downfall Date: 4/20/99 Author: Nick Turner for IBD Missteps in execution led to Eckhard Pfeiffer's ouster as Compaq Computer Corp. chief executive Sunday, but it was a failure to communicate that precipitated the fall. Pfeiffer didn't keep Wall Street up to date on company troubles. Repairing that broken trust between Compaq and the financial community should be a top priority for the world's top PC maker, Wall Street analysts say. And replacing Pfeiffer was a good first step, they add. ''(Pfeiffer) must have learned disclosure from the Clinton White House,'' said David Wu, analyst at ABN AMRO in San Francisco. ''The SEC should be on the case.'' Pfeiffer was asked to resign by Compaq Chairman Ben Rosen over the weekend. Pfeiffer had been running the Houston- based company since 1991. Rosen, along with directors Frank Doyle and Ted Enloe, assumed the office of chief executive. ''Looking ahead, we really felt we had to have a change in leadership,'' Rosen said in a conference call with analysts. Compaq Chief Financial Officer Earl Mason also resigned. He plans to take over as chief executive of Deerfield, Ill.-based Alliant Foodservice Inc. - a privately held firm. The changes followed the announcement of a profit shortfall in the first quarter - and a series of flubs in the delivery of information to investors. Problems started in March 1998, analysts say. Poor forecasts prior to that time led to a massive inventory buildup. Compaq had to slash prices to shed the excess stock, which nearly erased its profit for the first quarter. It was then that Compaq announced late on a Friday afternoon its first-quarter results would be weak. Some analysts, noting the problems had been developing for some time, would have preferred earlier warning. The company also wasn't always clear about its plans for Digital Equipment Corp. and the Web portal AltaVista, which was part of Digital. Compaq acquired Digital in June. The frenzied run-up of Internet stocks prompted many to suggest AltaVista be spun off. Compaq was mum about its plans until Jan. 26, when it announced AltaVista would be turned into an independent firm. But the announcement came on the eve of the fourth-quarter earnings release. And analysts weren't happy with the amount of detail provided. Compaq's earnings releases were criticized as deceptive. Its fourth-quarter announcement highlighted a 48% year- over-year increase in sales. But that number compared the sales of Compaq plus Digital with just Compaq alone. ''You had to dig to find the real number,'' said Art Russell, analyst at Edward Jones in St. Louis. In March, there was another snafu. In a meeting with Compaq executives, one analyst asked how the quarter was going. The company dropped a bombshell: January sales had been weak, officials said, especially those to small and medium-size businesses. The news rippled through the industry, even when other manufacturers reported no problems. And there was no press release, leading some to accuse Compaq of selective disclosure. The last straw came on April 9. The period during which companies typically pre-announce weak quarterly results had passed. Wall Street, therefore, figured Compaq was on track. So news that Compaq expected profits less than half that of Wall Street estimates came as a double shock. The earnings expectation is now 15 cents a share, down from 31 cents. The official results will be announced Wednesday. But what insulted analysts and investors was Compaq's apparent lack of honesty. The company continually blamed a slowdown in demand and price pressures for its woes. Others, such as Dell Computer Corp., Compaq's chief rival, dispelled those claims. Analysts suspected that poor execution was the culprit at Compaq. Compaq's board ultimately concurred. Still, some observers wonder if being more upfront would have bought Pfeiffer more time. ''Compaq's lack of credibility really forced their hand,'' Russell said. The company's new managers will have more on their hands than improving execution. They'll need to mend bridges with Wall Street. Some analysts feel the Securities and Exchange Commission should investigate the company's lack of disclosure. And at least three class-action lawsuits have been filed by shareholders. Compaq's problems in delivering information may be caused by its information systems. Analysts suspect that inventory data and other information are slow to reach the top brass. That's in stark contrast to other technology companies. Cisco Systems Inc. closes its books within a week. Compaq's acquisition of Digital may have compounded the crisis. As it digested the company, Compaq had to reconcile two sets of books, inventories and payrolls. And it hadn't been long since Compaq had completed another major purchase, that of Tandem Computers Inc. in 1997. The acquisitions transformed Compaq from a mere maker of PCs to a full-service computer company. Critics say Compaq should have mastered the PC business before trying to swallow two computing giants. ''Look at history. Whoever won a war fighting two fronts?'' said Wu at ABN AMRO. Compaq's board, which unanimously approved the transaction last year, says it has no regrets about acquiring Digital. ''I don't think we've fully exploited yet all of the potential of Digital, but I think we're well on the way,'' Rosen said. Compaq hasn't just struggled to communicate with investors. It's having an identity crisis in its dealings with customers, observers say. The company needs to style itself as more of a player in fast-growing Internet markets. Sun Microsystems Inc. and IBM Corp. have done this effectively. But despite AltaVista and the fact that it sells roughly a third of all World Wide Web servers, Compaq still is thought of as mainly a PC maker. ''We may not have done as good a job in publicizing our capabilities,'' Rosen said.

To: Windseye who wrote (58885)	4/20/1999 9:18:00 AM
From: rupert1	Read Replies (1) \| Respond to of 97611

This is how the UK (and probably Europe's) leading financial newspaper sers COMPAQ (thanks to helpinout for referring it). _______________ The fall of a high-tech hero The fall of Eckhard Pfeiffer, who has resigned as chief executive of Compaq Computer, shows American capitalism at its most cold-eyed, bruising and unsentimental. And it is a healthy sight. Until Sunday, Mr Pfeiffer was one of the most prominent businessmen in the US, widely admired for his turnround of Compaq. Catapulted into the top job in 1991, when the company announced its first quarterly loss, he presided over its growth from a business with $3bn (£1.8bn) of annual sales to some $40bn, and its expansion into a full line computer company. The proximate cause of his resignation was a profits warning last week that surprised Wall Street analysts, already on poor terms with the company. In a cutting edge, high technology industry, where share price valuations are extremely volatile, companies ignore good communications with the broking community at their peril. But behind the profits warning - which the company claimed reflected industry-wide trends - appear more deep-seated problems of strategy and execution specific to Compaq. One of the most serious is its difficulty in changing its personal computer business model to cope with the direct selling methods pioneered by Dell Computer, which are more suitable for a commodity product. By eliminating a layer of middleman dealers, and building to order, Dell has achieved far greater flexibility in pricing and inventory control. Compaq has fumbled its attempts to move in this direction. The company, which has jumped in size over the past two years through the acquisition of Tandem Computers and Digital Equipment, may also have been slow to get a grip on these new businesses, particularly Digital. All this suggests that while Mr Pfeiffer was an excellent manager of the company's growth in the mid-1990s, he may not have the ideal skills to oversee the much more complex period of evolution with which it is now grappling. Matching executives' strengths to a company's growth is hardly a problem unique to Compaq. Any fast-growing business can face a potential mismatch. But many companies are not prepared to act toughly. The temptation is to avoid embarrassing confrontations with corporate heroes, in the hope matters will right themselves. In many sectors, companies can still live off past laurels for a considerable period of drift and decline. Not so in an industry as fast-moving and open to new entrants as US PCs. The results may seem brutal. But US executive pay levels should more than compensate for an uncertain life at the top, and a willingness to embrace ruthless change is one of the strengths of American industry's competitive creativity.

To: Windseye who wrote (58885)	4/20/1999 9:49:00 AM
From: rupert1	Read Replies (2) \| Respond to of 97611

Wndseye: The earnings from the PC division is an enigma. Rosen and EP have successfully competed in whatever was the contemporary low end for the last 7 years. As late as January, 1999 we were being told that COMPAQ makes a better profit with its lower priced than with its higher priced PC's. Rosen has emphatically stated yesterday that COMPAQ will remain committed to the PC business, maintain its No.1 position and do it profitably. He said "it is a good business". This contrast with IBM which made a $1 billion loss in PC's. This being the case, how come the earnings shortfall from 32 to 15? Not long to find out!