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Compaq woes analyzed
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April 12, 1999: 9:01 a.m. ET
Tech expert Barrett says earnings warning reflects Compaq, not PC makers
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NEW YORK (CNNfn) - Compaq Computer's recent earnings warning says much more about the computer maker's troubles than about challenges faced by the personal computer industry at large, a top technology analyst said Monday.
Andrew Barrett, technology analyst at Salomon Smith Barney, noted all personal computer makers are squeezed by the trend to falling personal computer prices.
But Compaq's (CPQ) difficult integration of Digital Equipment Corp. coupled with its market strategies, is the major reason for its announcement that first-quarter earnings will be less than half of what analysts expected, Barrett said.
"We're looking at more of a Compaq issue," he told CNNfn's "Business Day" program.
Dell (DELL) computer is doing a better job reaching the small business and consumer market, Barrett said, while Compaq's integration with Digital Equipment Corp., which it bought last year, is proving costly.
Barrett expressed amazement at how far off Houston-based Compaq was from analysts' estimates. The company said it expects to earn about 15 cents a share in the quarter ended March 31, less than half the 31 cents a share estimated by analysts polled by First Call.
."I think that that number is almost shocking," Barrett said.
But while Barrett sees the number affecting Compaq stock Monday, he thinks its affect on other PC makers will be limited.
"This is going to be a bad day, but I'd be very surprised to see the spillover for a long period of time," Barrett said.
And with earnings season about to accelerate, the technology analyst sees one high-flying sector as immune from falling share prices.
"Internet companies tend to do extremely well during earnings season because most of them aren't earnings stories yet," Barrett said.
Finally, Barrett said IBM's announcement Monday of a partnership with RealNetworks to market music over the Internet is good for Big Blue.
"I think it's a great move for IBM," he said. 
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Compaq
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