CS First Boston Keeps 'Hold' on Compaq

Analyst Kevin McCarthy says impressive cost-cutting efforts helped the company to meet estimates despite weaker revenues

CS First Boston maintains its hold rating on Compaq (CPQ ).

Analyst Kevin McCarthy says Q2 results met the company's pre-announcement, but he cut his estimates because the computer maker trimmed Q3 revenue guidance. McCarthy cut the $35.9 billion 2001 revenue estimate to $34.9 billion, and cut the $39.5 billion 2002 estimate to $38.25 billion. He says the company made impressive strides in containing costs, allowing it to meet EPS estimates despite lower revenue volumes. He notes Compaq has laid off 5,100 employees out of 8,000 planned for 2001.

Due to these job cuts and other cost cuts, McCarthy maintians his $0.40 2001 EPS estimate and $0.65 2002 estimate. He sees the PC industry trough being deeper than expected in Q3, and says shares should find support near $11.

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