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PC makers see silver lining

Despite general weakness on Wall Street, several computer makers are managing to hold on to slight gains.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
2 min read
Despite across-the-board weakness on Wall Street this morning, several personal computer makers are managing to hold on to slight gains.

Compaq Computer got a boost today from Morgan Stanley Dean Witter analyst Gillian Munson, who resumed coverage on the company with an "outperform" rating.

Munson set a target price of $40 a share and a fiscal 1999 earnings estimate of $1.65 for Compaq. The company's stock was up slightly on the news, rising 0.0625 over yesterday to 34.250.

Two other PC makers inched up today as well. Gateway was trading at 57.250, up 0.3125, while Hewlett-Packard was at 52.3125, up 0.3125.

"Fundamental PC demand is healthy. July was a good month, and August appears strong," Munson said. "The channel [inventory] appears to be clearing a bit, and the supply-and-demand equilibrium is healthy now."

Because inventory channels are getting leaner, she noted, computer makers will be faced with one less adversity: They no longer will have to take deep price cuts on products.

But another problem will come to the fore, Munson added. "The declining [average selling price for computers] will probably slow as we go into 1999."

Piper Jaffray analyst Ashok Kumar, for his part, said in a recent report that he expects Dell Computer to post strong unit growth during the second quarter, which will help temper the declines in average selling prices. The company is expected to report its quarterly results on August 18.

Kumar maintained his "strong buy" rating on Dell's stock, as well as his fiscal 1999 earnings estimate on the company, which stands at $2.03.