Compaq Attack!
Tuesday, June 9, 1998
by Jeff Fischer
([email protected])
ALEXANDRIA, VA (June 9, 1998) -- The stock market rose once again for all, but -- as always -- more so for some than others. The feisty Nasdaq surged ahead 0.73%, while the S&P gained a smidge. Yet, the indices are merely trekking over ground that has been covered at least twice before (once on the first way up, again on the way down, and now again on the way back up); meantime, the Fool Port is nearing a new high, having gained more than 2% following yesterday's similar gain on strength in America Online and Amazon.com.
Today those two stocks were Grade A steaks while Iomega was a black eye, declining 7% following Monday's 19% advance. Iomega aside, 3Dfx joined AOL in the Grade A department, while all three of these companies had one thing in common: Compaq.
With $25 billion in annual sales, sixteen-year-old Compaq Computer (NYSE: CPQ) is the fifth-largest computer company in the world and is the largest supplier of personal computers. With recent operating margins of 12%, Compaq trades at 19 times its 1999 earnings estimate. In relation to the Fool Port, today the company announced deals with 3Dfx, Iomega, and AOL.
3Dfx (Nasdaq: TDFX) followers want the company's products offered by as many computer manufacturers as possible, so the stock continued to rebound with today's news. Compaq will incorporate Diamond Multimedia's (Nasdaq: DIMD) latest graphics accelerator powered by 3Dfx's Voodoo2 chipset in one of its Presario multimedia PCs. This option will be featured in Compaq's new "Built for You" custom PC retail program. (In the PC business, instead of "Be Like Mike," the battle cry is "Be Like Dell.")
The 3Dfx news is reminiscent of the type that Iomega (NYSE: IOM) reported regularly as it built an arsenal of corporate PC customers over the past three years. Today Iomega announced another large advance in this arena, sharing that Compaq will include the Zip drive as a standard feature in the majority of its new Presario PCs. The "Zip Built-In" drive will be included as standard in at least seven new Compaq models, helping to build the argument that Iomega is moving towards becoming the new personal data storage standard. Being an option was the first step, being a "standard feature" is nothing short of sweet.
The next arrow in Compaq's quiver is America Online (NYSE: AOL). These two companies announced a new multi-year agreement whereby Compaq will feature AOL on all Presario desktop Internet PCs. Compaq will also support AOL members through its new "Easy Access Internet Keyboard." These new Compaq keyboards have four extra buttons that link users to specific Internet services (including AOL and Yahoo!), for which Compaq will receive a monthly fee from each company. The four keyboard buttons offer instant e-mail access, instant Internet access, instant search functions, and a secure E-commerce button. Reportedly Compaq expects the partner alliances on these buttons to be a billion dollar business by 2001.
Certainly does sound cool. How about an instant Fool button?
America Online also rose on new analyst coverage that rated the shares a "buy." J.P. Morgan gave the stock a $110 price target. Also responsible is news that the NBC network division of General Electric (NYSE: GE) took a 19% equity stake in CNET's (Nasdaq: CNWK) SNAP! Internet service with an option to buy up to 60% of SNAP! at a later date. The NBC division also initiated a 4.99% equity stake in CNET, whose stock jumped 36% on these announcements, lifting other Internet leaders with it.
Amazon.com (Nasdaq: AMZN), for example, responded by blasting to a new all-time high, closing above $51 per share and posting an 11% one-day gain. Consider for a moment that it typically requires two years to yield that type of return on the average bond. Amazon has gained 170% for the Fool in nine months, while its quarterly sales have grown 214% (from the second quarter of 1997 to the first quarter of 1998).
But are you baffled by the prospects for the company? If so, now is the time to ask questions. Tomorrow Tom Gardner will interview Amazon.com's CFO, Joy Covey. If you have questions that you'd like answered, please post them on the Amazon message board tonight. Tom is interviewing Ms. Covey for the Fool's new radio show that debuts on Saturday in Los Angeles and Atlanta. If you'd like the syndicated radio show to play in your area, please contact your local radio station at the e-mail address provided.
Fool on!
--Jeff Fischer
[Related message boards: Amazon.com I America Online I 3Dfx Interactive I Iomega I Compaq]
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Day Month Year History FOOL +2.38% 5.22% 21.22% 306.81% S&P: +0.24% 2.53% 15.25% 143.98% NASDAQ: +0.73% 1.23% 14.67% 150.04% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 88.63 2337.14% 5/17/95 1960 Iomega Cor 1.28 6.50 407.65% 10/1/96 84 LucentTech 23.81 74.50 212.92% 9/9/97 580 Amazon.com 19.11 51.25 168.17% 8/12/96 130 AT&T 39.58 61.38 55.07% 2/20/98 215 DuPont 59.83 78.19 30.67% 1/8/98 115 S&P Depos. 95.91 112.16 16.94% 2/20/98 200 Exxon 64.09 69.88 9.03% 4/30/97 -1170*Trump* 8.47 8.56 -1.11% 2/20/98 270 Int'l Pape 47.69 46.94 -1.58% 1/8/98 425 3Dfx 25.67 22.06 -14.04% 8/24/95 130 KLA-Tencor 44.71 28.69 -35.84% 6/26/97 325 Innovex 27.71 17.75 -35.94% 8/13/96 250 3Com Corp. 46.86 27.63 -41.05% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 62923.75 $60341.88 9/9/97 580 Amazon.com 11084.24 29725.00 $18640.76 5/17/95 1960 Iomega Cor 2509.60 12740.00 $10230.40 10/1/96 84 LucentTech 1999.88 6258.00 $4258.12 2/20/98 215 DuPont 12864.25 16810.31 $3946.06 8/12/96 130 AT&T 5145.11 7978.75 $2833.64 1/8/98 115 S&P Depos. 11029.25 12897.97 $1868.72 2/20/98 200 Exxon 12818.00 13975.00 $1157.00 4/30/97 -1170*Trump* -9908.50 -10018.13 -$109.63 2/20/98 270 Int'l Pape 12876.75 12673.13 -$203.63 1/8/98 425 3Dfx 10908.63 9376.56 -$1532.06 8/24/95 130 KLA-Tencor 5812.49 3729.38 -$2083.12 6/26/97 325 Innovex 9005.62 5768.75 -$3236.87 8/13/96 250 3Com Corp. 11715.99 6906.25 -$4809.74 CASH $11662.57 TOTAL $203407.29
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