<BREAKFAST WITH THE FOOL>

Monday, April 12, 1999

"Please find me a one-armed economist so we will not always hear 'on the other hand...'" -- Herbert Hoover

Latest Market Numbers

Q1 Warning From Compaq

Compaq Computer (NYSE: CPQ) warned after the close of trading on Friday that its first-quarter results likely will fall short of analysts' estimates, coming in at around $0.15 a share on revenues of $9.4 billion. That's less than half of the $0.31 a share analysts had been projecting but better than last year's Q1 EPS of $0.01, which was similarly far less than forecasts of $0.35. The Houston-based computer make blamed the anticipated shortfall on lower-than-expected demand and increased discounting in the commercial PC business.

Compaq President & CEO Eckhard Pfeiffer said that although he expects market conditions to remain competitive, the company plans to expand its business, grow market share profitably, and continue aggressively cutting costs and operating expenses. Compaq said it will unveil its new enterprise strategy next week at its Innovate 99 forum in Houston. Compaq is scheduled to post Q1 earnings on April 21.

Compaq's sales have suffered from the company's decision to undercut computer wholesalers and distributors by ramping up direct sales by phone and online to better compete with rivals Dell Computer (Nasdaq: DELL) and Gateway (NYSE: GTW). Compaq shares tanked almost $5 in after-hours trading Friday to $26 from a close of $30 15/16, dragging down Dell, Gateway, and Intel (Nasdaq: INTC). That takes Compaq to roughly half its 52-week high of $52 1/4 reached back in late January following better-than-expected fourth-quarter results.

News to Go

A French court denied Coca-Cola's (NYSE: KO) appeal against the French government's rejection of its 5 billion franc ($822 million) bid for Pernod Ricard SA's Orangina drink. The world's largest soft-drink maker said that negotiations with French officials will continue and that it remains hopeful that the deal will go through.

The world's largest auto maker General Motors (NYSE: GM) is expected to approve plans to distribute its remaining 82.3% stake in Delphi Automotive Systems (NYSE: DPH), the world's largest auto-parts maker, to shareholders next month, The Wall Street Journal reported. Spinning off the rest of Delphi would reduce GM's vertical integration but boost Delphi's ability to sell to GM competitors.

Ford Motor Co. (NYSE: F) announced it will acquire Kwik-Fit, the largest independent vehicle maintenance and light-repair chain in Europe, for about 1 billion pounds, or $1.6 billion, in cash. The world's second-largest auto maker said the purchase will expand its ability to reach new customers by servicing older and non-Ford vehicles. Kwik-Fit has more than 1,900 service locations in the U.K., Ireland, and continental Europe.

Entertainment and media giant Walt Disney Co. (NYSE: DIS) is considering ways to package its Internet assets, including its 43% stake in Infoseek (Nasdaq: SEEK), into a separate publicly traded entity, according to The Wall Street Journal. Disney has also begun talks to take majority control of Infoseek sooner than the 2001 originally agreed to by the two companies. Media rivals Time Warner (NYSE: TWX) and CBS Corp. (NYSE: CBS) have recently said they're also considering converting Internet holdings into separate companies.

Semiconductor wafer fabrication systems maker Novellus Systems (Nasdaq: NVLS) this morning posted first-quarter earnings of $0.25 a share, down from $0.60 a year ago but in line with analysts' expectations. The company said orders showed continued strength for a second straight quarter and that it remains "cautiously optimistic as the industry continues along its path of recovery."

Diversified manufacturer Tyco International's (NYSE: TYC) chairman, Dennis Kozlowski, said that from internal growth alone -- without acquisitions -- the acquisitive company will be able to nearly double its sales to $40 billion and boost earnings by 20% to 25% a year over the next five to six years, Barron's reported. This week's Barron's has Kozlowski on the cover as "the Next Jack Welch," a reference to the legendary head of General Electric (NYSE: GE).

The Pentagon is expected announce this week its decision to block General Dynamics' (NYSE: GD) $1.4 billion offer to acquire Newport News Shipbuilding (NYSE: NNS), which had the support of the Navy, The Wall Street Journal reported. Defense Department officials are concerned about the continuing consolidation of the defense industry and that the companies wouldn't be able to achieve new efficiencies without cutting jobs.

More Foolishness

Fools in the D.C. area, come out to a golf shoot-out at HillTop Golf Club to benefit Tim Aycock, a techie here at the Motley Fool who is undergoing cancer treatment. Click here for more info. Donations welcomed... See what you might've missed last week in Fooldom in the latest Notes from a Fool.

-- Friday's Evening News
-- Fool Community
-- Post of the Day
-- Latest Fribble

Also, check out the Lunchtime News at 12:30 p.m. for updates on the top stories of the day, and remember to start each business day with Breakfast With the Fool at 9 a.m.

Let us know what you think of this feature. Send all comments and suggestions (including Foolish quotes) to the Breakfast Fools.

Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor