Calling Compaq's Capellas

While was interviewing Compaq's CEO, Michael Capellas, last week he suddenly broke-off to talk tactics with HQ. What could be more important than speaking with your favorite Middle East Web site? Come inside to find out.

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By  Rob Corder Published  October 9, 2000

Five minutes into an interview with Compaq’s chairman and CEO, Michael Capellas, where we discussed his company’s move from PC company to full services company, he withdraws to make an urgent phone call. A profit warning from Dell Computer has sent Compaq stock into freefall.

A week previously, Compaq had emerged relatively unscathed by similar profit warnings from Apple Computer and Intel Corporation. But when Dell, a name synonymous with PCs, told Wall Street it would fall short of expectations, Compaq could no longer hold back the tide of sentiment.

To be fair to Compaq, it was not the only “full services” company affected. IBM and HP have also been hit hard. But Compaq fell furthest. It is hard not to conclude that the company has not managed to convince investors that its financial health is inexorably linked to the PC market.

When the markets open today, Compaq will trade at around $25, its lowest price since July. In fact, Compaq’s price had been strengthening well, reaching a peak of almost $35 mid-August. Since that time there have been no poor results, no warnings, no bad news, yet market sentiment about the PC industry has dragged its price down $10.

I do not claim to be an investment expert. But having spent a couple of days around Compaq’s senior executives, they do not look like a group of people dreading the announcement of their Q3 results next week. Quite the opposite. There is a spring in their steps that had been noticeably lacking in the dark post-Digital-acquisition days.

Compaq’s shares are trading at a fraction of the earnings ratios of other IT high-flyers, making it, in my opinion, a bargain at $25. When the company’s stock held firm in the face of Intel and Apple’s profit warnings, it showed there is some investor confidence in the company. You might call it a safe haven.

If it was a safe haven at $30, what do you call it at $25 when there is no trouble expected on the horizon? Me? I call it a must-buy.

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