Shakeup at Compaq Stands to Move Money Back Into Tech

A week ago Compaq was going to rattle the market. This Monday its news looks good for stocks.
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Remember last

Monday when the sky was going to fall? When

Compaq's

(CPQ)

ill-timed earnings warning was going to lay Wall Street low?

It didn't, of course. There was an opening dip, and then stocks chugged higher. True, tech shares suffered later in the week, as did other growth issues, but this had as much to do with the move into cyclical stocks and a broadening of the market that pulled money out of the stocks that, for more than a year, have really been the only game in town.

Now there's the

news that Compaq CEO Eckhardt Pfeiffer and CFO Earl Mason are out. For many Compaq investors, the management shakeup is a long time coming -- the top PC maker's stock has languished over the last two years, and its whining about how there was an industrywide slowdown, while its competitors said there wasn't, suggested a company in denial.

The question for Wall Street this morning is if the Compaq news is asymmetrical. Investors didn't think the company's trouble augured all that badly for tech at large, but does the suggestion that it's finally working to deal with its problems help bring money back into tech?

"Psychologically, it could provide the impetus for people to move in," said Todd Clark, head of listed trading at

Charles Schwab

, but generally he feels that the goings on at Compaq are really "a company-specific thing."

Still, it looks to Clark that tech may have found its bottom. He's been closely watching the

Morgan Stanley High Tech

index, which bounced off 1000 Thursday -- an important support level. "As long as they can hold 1000 on a closing basis, you can make the case that it's a better time to buy tech now than it was a couple of weeks ago," he said.

If techs can come back, that would be tremendously bullish. Technical analysts love the move into cyclicals and the broadening of the market, but they would like to see tech hold. That, they say, would make for a pretty terrific second quarter.

At 9 a.m. EDT, things were looking good. The

S&P 500

futures were up 8.4, about 4 above fair value and indicating a good open.

The 30-year was flat at 95 11/32, putting the yield at 5.57%.

Japanese stocks saw a day of profit-taking, with the weakness in tech issues and recent strength in the yen getting bandied about as reasons for the declines. After a 22% climb off its

March low, though, the Tokyo market is going to find reasons to take an occasional breather even if there aren't any. The

Nikkei

dropped 177.37, or 1.1%, to 16,674.21.

Hong Kong stocks took up where they left off on Friday and headed higher. The

Hang Seng

added 276.14 points, or 2.2%, to close at 12,766.44.

With the prospect of a good day on Wall Street driving them on, Europe's major markets were higher. In Frankfurt, the

Dax

was up 84.97, or 1.7%, to 5240.32. In Paris, the

CAC

was up 44.23, or 1%, to 4345.14. And in London, the

FTSE

was up 20.5 to 6441.1.

Monday's Wake-Up Watchlist

By

Brian Louis

Staff Reporter

  • Compaq Chief Executive Eckhard Pfeiffer and Chief Financial Officer Earl Mason resigned yesterday. Compaq's board named Chairman Ben Rosen and two vice chairmen -- Frank Doyle and Robert Ted Enloe III -- to a three-man office of the chief executive. TheStreet.com wrote about the situation yesterday.
  • Columbia Energy Group (CG) - Get Report yesterday made a hostile bid for Consolidated Natural Gas (CNG) for roughly $6.7 billion, or $70 in cash and stock. In February, Consolidated Natural agreed to be bought by Dominion Resources' (D) - Get Report for $6.3 billion in stock. The Dominion deal's value has fallen to roughly $5.5 billion as Dominion's stock price has slumped. Yesterday, Columbia said the $70-a-share bid consists of $24.50 in Columbia stock and $45.50 in cash. Based on Friday's close, Columbia said the offer represents a 33% premium to Consolidated's market price and a 21% premium over Dominion's offer in February.
  • BellSouth (BLS) is investing $3.5 billion for a 10% equity stake in Qwest Communications (QWST) .
  • Citigroup (C) - Get Report reported first-quarter earnings, excluding charges, of $1.04 a share. Including charges, the financial services behemoth reported earnings of $1.01 a share. In the year-ago period, the company posted earnings of 90 cents a share. The First Call 22-analyst consensus estimate called for earnings of 87 cents. Meanwhile, Dime Bancorp (DME) is buying Citibank's automobile finance business. In other news (earnings estimates from First Call):
  • Airbus is stepping up its efforts to loosen Boeing's (BA) - Get Report grip on big suppliers in Japan, a country increasingly important to the European consortium's strategic plans, according to a report in The Wall Street Journal.
  • America Online (AOL) is preparing to bring its Internet service to TV sets, the San Jose Mercury News reported over the weekend. The Mercury News, citing several industry sources, reported that AOL has lined up at least two manufacturers to build set-top boxes that can send email, provide AOL's information services and browse the Web using a standard TV set and phone line.
  • BankAmerica (BAC) - Get Report posted first-quarter earnings of $1.08 a share, beating the 25-analyst estimate of $1.03, but down from the year-ago operating earnings of $1.11.
  • Bank of New York (BK) - Get Report reported first-quarter earnings of 41 cents a share, in line with the 23-analyst estimate and up from the year-ago 36 cents.
  • Case (CSE) reported a first-quarter loss of 68 cents a share, narrower than the 16-analyst estimate of a loss of 85 cents, but reversing the year-ago profit of 88 cents.
  • CNF Transportation (CNF) - Get Report posted first-quarter earnings of 58 cents a share, excluding a gain, beating the 12-analyst estimate of 51 cents and up from the year-ago 33 cents.
  • Deutsche Telecom (DT) - Get Report and Telecom Italia (TI) confirmed they're in talks about a linkup.
  • Lexmark (LXK) posted first-quarter earnings of 96 cents a share, beating the eight-analyst estimate of 88 cents and up from the year-ago 69 cents.
  • Eli Lilly (LLY) - Get Report posted first-quarter earnings, excluding one-time events, of 53 cents, in line with the 24-analyst estimate and up from the year-ago 46 cents. Lilly said worldwide sales for the first-quarter rose 8% from a year ago to $2.3 billion. Sales of Prozac fell 4% in the first quarter to $589.9 million, down from the year-ago $614.7 million.
  • Temple-Inland (TIN) posted first-quarter earnings of 33 cents a share, beating the 12-analyst estimate of 21 cents, but down from the year-ago operating earnings of 47 cents.