Feeds

Compaq filing shows firm on sticky wicket

Share price down to $26 but company now undervalued

  • alert
  • submit to reddit

Internet Security Threat Report 2014

Analysis The share price of Compaq closed at $26 on Wall Street last night, reflecting the concern of the markets about its overall position. The nature of the problems it faces in the future were outlined in some detail in the 10-Q form it filed with the US Securities and Equities Commission (SEC) earlier this week. One of the problems Compaq now faces is making its acquisition of Digital (and to a lesser extent Tandem), work properly. According to the filing, while Compaq believes Digital will improve its operating results, nevertheless it has had to recognise that combining product lines -- and sales teams -- is not easy. The filing says: "Compaq confronts challenges in synchronizing diverse product roadmaps and business processes and integrating logistics, marketing, product development, services and manufacturing operations to achieve efficiencies. Timing of these decisions is a critical element in Compaq's success. Taking the necessary steps may lead to gaps in short-term performance; delaying action will reduce Compaq's ability to compete effectively because resources and people will be too dispersed to achieve acceptable rates of return. Compaq's high-end business in particular has been affected by integration issues involving customer perception, overlapping product lines and the need to implement appropriate sales force training and incentive plans." All of this is significant. As we have reported here earlier, there are two separate sales teams with two separate product lines at the mid to high end attempting to sell two separate chip platforms to the same customer. This begs the question of how far Compaq will push its Alpha microprocessor technology, and how much it will invest in that platform in the future. And while many independent analysts believe that the Alpha microprocessor is a fine and advanced chip, the question still remains how far Compaq, on its own, can pursue this technology, faced with competition from Sun, HP and even its former close partner, Intel. The filing also warns that a search for a new CEO could cause uncertainty and difficulty in retaining staff. Here, in the UK, we have seen many of our long standing and good contacts at Compaq leave, to join other firms including former bitter rivals such as Dell and Hewlett Packard. On the PC end, Compaq has alienated many of its channel partners by taking a "me-too" approach, essentially attempting to clone Dell's successful direct model at the expense of distributors and in some cases corporate resellers. Nevertheless, Compaq is now a giant of a company, and although we may see its share price drop lower than yesterday's $26, this, to us shows that its stock is undervalued. None of the problems outlined in SEC filing are terminal, and the ability of Compaq to recover should not be underestimated. ®

Secure remote control for conventional and virtual desktops

Whitepapers

Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Protecting users from Firesheep and other Sidejacking attacks with SSL
Discussing the vulnerabilities inherent in Wi-Fi networks, and how using TLS/SSL for your entire site will assure security.
Saudi Petroleum chooses Tegile storage solution
A storage solution that addresses company growth and performance for business-critical applications of caseware archive and search along with other key operational systems.