Compaq’s Warning Weakens PC Stocks

The Nasdaq tried to rally in the morning after the U.S. Supreme Court apparently handed George W. Bush the presidency, but lackluster holiday retail sales and an earnings warning from Compaq combined to push the tech stocks lower.

Not surprisingly, Compaq joined Apple and Gateway by lowering revenue forecasts about 9% to $11.3 billion or 7% higher than a year ago. The Houston-based company cut earnings estimates to $0.29 from $0.36 per share.

C/NET News reported, "Compaq has faced mounting problems with as much as 10 weeks of inventory backed up for the holidays. In a normal selling season, that would not be a problem, said ARS analyst Matte Sergeant. But with market researcher PC Data reporting retail PC sales down 12 percent in November year-over-year, Compaq faces a tough job clearing out stock." Compaqis stock lost 2.67 to 18.10.

Reuters quoted an H&Q analyst, "We believe the confluence of evidence in and around the PC industry suggests that there has been a notable change in business conditions in the market since November.ii

As a sign of the times, Reuters reports, "Taiwan personal computer giant Acer said on Tuesday it has reduced the number of its overseas manufacturing plants to 12 from more than 20 due in part to a slowdown in personal computer demand." Aceris sales are down 42% in the last year.

Appleis stock shed 3/8 or -2.44% to 15 dollars on volume of 6 million shares.

Charles Haddad of BusinessWeek expressed his faith in Steve Jobs to quickly turn things around at Apple, even though Jobs has made mistakes.

The Nasdaq sagged 108 points (-3.71%) to close at the sessionis low of 2822 on volume of 2 billion shares.

The Dow climbed 26 points (0.24%) to close at 10794 on volume of 1.1 billion shares.

The S&P 500 lost 11.16 points (-0.81%) to close at 1360.02.

In Apple related businesses: Akamai shed 5 3/16 to 34 1/4. Adobe will announce earnings tomorrow, the stock sagged 4 1/2 to 66 3/16.

International Data Corporation said that worldwide server revenues grew 12% to $15.4 billion in the September quarter, and server shipments were up 21% in the last year. Server revenues grew 6% from the second quarter to the third for the biggest growth in server market this year. That good news for IBM and Sun, which control the top two spots in the server market. IBM lost 2 5/8 to 91 1/4. Sun lost 2 1/8 to 31 3/4.

Now that Compaq has warned, the analyst believe Dell may have to lower earnings and revenue figures again. Dell fell 1 1/16 to 20 7/16.

Prudential Securities downgraded Microsoft to a hold from "accumulate" and cut earnings estimates by a penny after Compaq warned retail desktop and laptop PC sales are way below targets. Microsoftis stock fell 1 1/8 to 57 1/4.

The same analyst, Doug Cook of Prudential Security, who downgraded Microsoft also wrote that Intel may freeze its capital expenditures in 2001, after lowering Q4 revenue estimates last week. Meanwhile, Intel will delay the opening of a chip manufacturing facility in Ireland for a year. Intel lost a dollar to 35 1/2.

In economic news: Retail sales dropped 0.4% in November surprising economists. However, excluding automobile sales retail sales would have been up 0.2%

According to the Wall Street Journal, "Sales of durable goods -- big-ticket items meant to last at least three years -- sank 1.1%. And car-dealer receipts plunged 2.2%, the sharpest monthly drop since a loss of 4.9% in July 1998, when GM was feeling the effects of a two-month strike. Despite the weakness, overall retail sales were 5.2% higher than a year earlier."

For full quotes on all the companies mentioned in this article, we have assembled this set of quotes at Yahoo! for your reference. For other stories regarding Appleis stock activity, visit our updated Apple Stock Watch Special Report.

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