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Compaq And Dell Move In Different Directions

Compaq is struggling during the economic downturn for some of the very reasons that Dell Computer is apparently able to withstand it. Dell (DELL-Nasdaq) expects to meet its third-quarter forecasts partly because it made more than 35,000 emergency shipments of IT equipment to companies, government groups, and relief agencies affected by the World Trade Center and Pentagon attacks. Those ...
Compaq is struggling during the economic downturn for some of the very reasons that Dell Computer is apparently able to withstand it. Dell (DELL-Nasdaq) expects to meet its third-quarter forecasts partly because it made more than 35,000 emergency shipments of IT equipment to companies, government groups, and relief agencies affected by the World Trade Center and Pentagon attacks. Those shipments--along with orders from new customers, rising public-sector demand, uncertainty surrounding archrival Compaq, and falling component prices--mean Dell will likely meet its mid-August forecast of 15 cents to 16 cents earnings per share on revenue of $7.2 billion to $7.6 billion.

Dell's confidence contrasts markedly with Compaq (CPQ-NYSE). The PC maker, in the throes of uncertainty caused by its proposed merger with Hewlett-Packard, predicts a loss per share of 5 cents to 7 cents on revenue of $7.4 billion to $7.5 billion for its third quarter. In July, it forecast a profit of 7 cents to 9 cents per share on sales of $8 billion to $8.4 billion. Compaq CEO and chairman Michael Capellas blames the shortfall on the Sept. 11 attacks and merger uncertainty, as well as logistical woes from the attacks and a typhoon in Taiwan.

Beyond the current quarter, Dell president and chief operating officer Kevin Rollins says an uptick in IT spending is coming as the replacement cycle arrives for equipment bought in 1999 for Y2K preparation and upgrades postponed this year finally go through.

However, Compaq's Capellas is skeptical that anyone can accurately make such a prediction. "Though we have constant dialogue with our partners and customers," he says, "seeing the future in too-specific terms is pretty tough right now."