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Compaq Shares Plunge 14% on Analyst Reports

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TIMES STAFF WRITER

Amid signs of a slowdown in personal computer sales, Compaq Computer Corp. shares fell 14% Friday--the largest single-day plunge in over three years--on reports that the company will experience weaker-than-expected profit and revenue.

Compaq shares dropped $5.63 to close at $35.38 on the New York Stock Exchange, with more than 74.5 million shares changing hands, making it the most active stock of the day.

Concerns about the world’s largest maker of personal computers also helped push down the price of Intel Corp., Micron Technology Inc. and other computer-related firms. Shares of Intel, the largest computer chip maker, dropped $7.81 to close at $119.94 on Nasdaq. Micron, one of the world’s largest makers of computer memory chips, fell $9.19 to close at $57.63 on the NYSE.

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The immediate source of the Compaq plunge appeared to be a pair of reports that came out Wednesday and early Friday.

Michael Kwatinetz, an analyst with Credit Suisse First Boston, met with Compaq Chief Executive Eckhard Pfeiffer and Chief Financial Officer Earl Mason on Wednesday, according to a Compaq spokesman. Kwatinetz later lowered his profit forecast to 31 cents from 36 cents a share.

Early Friday, Merrill Lynch analyst Steven Milunovich lowered his projections of Compaq’s revenue from $10.1 billion to about $9.8 billion. He reduced his profit projections to 30 cents a share from 35 cents. A Compaq spokesman said that Milunovich had not been briefed by Compaq or had any special meeting with the company.

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Compaq will report first-quarter earnings in mid-April. The company would not comment further on Friday’s stock drop.

Despite the lowered expectations for Compaq, the company still remains the dominant personal computer maker, with 31.6% of the market, according to a report on hardware sales from the Reston, Va.-based research firm, PC Data. Hewlett-Packard Co. accounted for 25.5%, followed by IBM Corp. with 12.8% of the market.

Intel’s problems extended a bit further than its connection with Compaq, one of its major buyers. PC Data reported Friday that for the first time retail sales of microprocessors from Advanced Micro Devices Inc. exceeded Intel’s. According to PC Data, the AMD-K6 family of processors accounted for 43.9% of all desktop computer processors in January. Intel had 40.3%.

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AMD’s processor sales were boosted by the firm’s strong move into the sub-$1,000 PC market. AMD stock fell 25 cents to close at $17.88 on the NYSE.

The lowered expectations for Compaq and Intel’s tumble followed other grim computer sales news.

Last week, Dell Computer Corp. reported that fiscal fourth-quarter sales rose 38%--the first time in the last six quarters that it had fallen below an average of 50%.

Dell fell $1.63 Friday to close at $80.13 on Nasdaq.

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Compaq’s Ride

Compaq Computer’s shares in recent months had just broken out of a long stretch of flat performance--only to be slammed again on Friday amid warnings of weaker-than-expected sales. Monthly closes and latest on the New York Stock Exchange:

Friday: $35.38

Source: Bloomberg News

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