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

To: Andreas who wrote (60328)	5/2/1999 10:21:00 PM
From: Loki	Read Replies (1) \| Respond to of 97611

Andreas...Forget the exact number .16 (.22 - .23) because of higher SGA, that was an example, in extreme. In the postulation of SGA the idea was to try to find the analysts' view and what they might have used. Very likely they would not use 12% with the addition of DEC, but possibly something lower than what it ended up to be in Q1 99. If I didn't word that point correctly...it's my fault. You are correct..."The key is what did the analyst community use in their assumptions for each component of the income statement?" (who did you ask...anything that can help in determining this question?) I believe that your conclusion has incorrect %'s SGA to REV. (???) Q4 98 - 14.4% and Q1 99 - 15.7%.....If Q4 98 was used to compare to Q1 99 (Q4 and Q1 are different cycles) then the trend of any improved SGA reversed itself in Q1 99. (Also 98 8K report states an expected improvement in SGA for 99) Didn't happen in Q1. In any case it was stated many times that SGA was a contributing factor not the only reason CPQ was .16/shr short. Sorry for any confusion. Compare DELL SGA to REV's (maybe analysts were influenced by this) 96...11.3% 97...10.7% 98... 9.8% Loki BTW...maybe I missed something, but did you compare COGS Q to Q? ...and how it relates to revenues...it surprisingly didn't look that bad.

To: Andreas who wrote (60328)	5/2/1999 11:02:00 PM
From: Windseye	Read Replies (1) \| Respond to of 97611

Andreas, I calculate Q1 99 Cost of goods sold as 75% of revenues (7092/9419) and Q1 98 Cost of goods sold as 82% of revenues (4664/5687). So, we're looking at a decrease in cost og goods sold, not an increase. But SGA is clearly much larger in Q1 99. As others have suggested the major dif between the two years Q1 is the presence of DEC staff. Apparently there is a need to trim the staff expense part of AGA OR increase the revenues by slicking up their operations. The other factors comprising the short fall in revenues we're unable to see in the financial report are exactly which comps were sold more cheaply than expected, which servers and work stations did not sell as anticipated, etc., etc. IF they had made the 10 bil number than clearly earnings would have been .33 higher (10 bil-9.419bil/1.74bil shares). Even dropping to 9.75 bil would have produced another .19/share. All in all I think it was the revenue short fall problem, which is the failure to execute the model, which has poroblems because of the ODM and the lack of stratification of product and service to method of sale (channel, direct, dealers, service personnel, etc.) If any of this makes any sense in hypothetical form then we "should" see in the future: 1. more clarification of "who" gets to sell what with minimal competitve overlap 2. more comprehensive service/design initiatives and performance 3. more/better product/market differentiation Doug