Compaq Shares Plunge 14% on Analyst Reports

By ASHLEY DUNN

Feb. 27, 1999 12 AM PT

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.

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.

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%.

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

Technology and the Internet

Ashley Dunn

Ashley Dunn is the former weekend editor at the Los Angeles Times. He previously served as assistant managing editor in charge of California news. Dunn joined The Times in 1986 as a suburban reporter in the San Gabriel Valley and later moved to the Metro section, where he participated in coverage of the 1989 Loma Prieta earthquake and the 1992 Los Angeles riots. After a stint at the New York Times, Dunn returned to Los Angeles in 1998 as a reporter and then editor in The Times’ Business section. He later was named to run science coverage. He worked as deputy national editor from 2007 to 2011 and played a central role in the coverage of some of the biggest national stories of recent years, including the 2010 oil spill in the Gulf of Mexico and the 2008 election of President Obama. Prior to his career at The Times, Dunn worked at the South China Morning Post in Hong Kong, the Danbury News-Times in Connecticut and the Seattle Post-Intelligencer. Dunn is a California native who has worked as a dishwasher in Sacramento, a printer in San Francisco and a bicycle repairman in Walnut Creek. He has lived along the levees of the Sacramento Delta, the Powell-Hyde Street cable car line and the shaded streets of Pasadena. He is a graduate of UC Berkeley with a degree in English.

Compaq Shares Plunge 14% on Analyst Reports

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