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Tech Industry

Megamerger fallout: Downgrades

Compaq shares rebound slightly despite some analysts' downgrades after the megamerger with Digital Equipment.

    Compaq Computer (CPQ) shares rebounded slightly today after falling 9 percent yesterday, despite some analysts' downgrades after the company's megamerger announcement with Digital Equipment (DEC).

    The acquisition, which had been the subject of tenuous negotiations for at least two years, essentially will provide Compaq with the high-end hardware technology and the worldwide corps of consulting engineers it has needed to act as a global technology provider.

    Nevertheless, the computer maker was downgraded today by BT Alex. Brown, to "market perform" from "buy," and by Deutsche Morgan Grenfell, to "accumulate" from "buy."

    Analysts were somewhat skeptical about Digital's prospects as well. For the most part they characterized the merger deal as having benefits, but they warned that these benefits would not materialize in the short term, as the two companies grapple with transition issues.

    Salomon Smith Barney lowered its rating on shares of Digital to "neutral" from "buy."

    Despite the downgrade, Digital shares continued to move up in trading today. DEC stock climbed another 15/16 by close of market today, after it soared 21.6 percent yesterday to close at 55-7/16. Compaq shares, meanwhile, recovered somewhat from yesterday's dip, inching up 1 point to close at 30.