What to Expect from Compaq
THIS IS A RUSH TRANSCRIPT.  THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. DEBORAH MARCHINI, CNN ANCHOR: Keeping you "Ahead of the Trend" this morning, Larry Seibert, portfolio manager at Barrett Associates, is here to give us a preview of what we can expect from Compaq and what it could mean for techs in general. Good morning. Nice to have you here with us.</s>LARRY SEIBERT, BARRETT ASSOCIATES: Good morning. Good to be here.</s>MARCHINI: And Patricia Chadwick is here with us as well. I want to start with Compaq. Jen Rogers mentioned in her recent appearance that the real focus is not on the earnings -- we already know what they are going to be -- but on the third quarter and what the company will say about it. What do you think?</s>SEIBERT: I would agree with that. If there is one lesson that we have learned this quarter, it's that you should not buy ahead of the earnings. And I think that's good advice for Compaq as well. Some of the other companies that have come out and given their earnings have generally missed on the top line, but made the earnings number based on good cost control. We saw that with Apple. We saw that with IBM. And we probably will see the same sort of thing with Compaq, but guidance might be difficult.</s>MARCHINI: I was going to say, because does it make an analyst happy to see profits OK if it comes from cost controls and not the top line, not revenue?</s>SEIBERT: Well, as Patricia mentioned before, it is management, management, management here. We really need to purchase companies with very strong</s>MARCHINI: Is Compaq management doing what it needs to do?</s>SEIBERT: I think so. I think they are attempting to do what they need to do. They have raised the severance -- the number of people they are going to let go to 8,500. They are focusing on the service area, which is now about 24 or 25 percent of their business -- like IBM, about 35 percent. And IBM was one of the brighter earnings reports that we have seen in the PC area.</s>MARCHINI: We've got Patricia looking for 2500 on the Nasdaq. I want to know if you agree with her.</s>SEIBERT: I think certainly we will get there. The question is when we'll get there. The second quarter was a little bit tougher than people have expected. And we believe the third quarter will be again a little bit tougher than people expect -- so not anytime soon. However, we do believe in technology in the long term. And those are really driving the Nasdaq.</s>PATRICIA CHADWICK, RAVENGATE PARTNERS: Now, let me ask you a question again about the PC industry. We know that it's a very tough competitive industry. And people say that the margins on boxes get smaller and smaller. Could Microsoft's new XP product actually stimulate demand over the next several years, so that we have kind of a rebirth of the PC business?</s>SEIBERT: I think that's sort of the bright side here. That is absolutely possible. Microsoft is bringing out what appears to be a very good product. On the flip side to that, however, we are seeing somewhat more powerful servers and somewhat less powerful nodes within the enterprise. In the home, we are looking for very powerful PCs that are very capable of doing some pretty interesting things -- so a little bit of a mixed picture there.</s>MARCHINI: You've got a mixed picture there. I mean, what's more important to PC makers? Is it the home user?</s>SEIBERT: Absolutely not. Seventy percent of the PCs go into corporations.</s>MARCHINI: All right. So Windows XP may not have as much of an impact there.</s>SEIBERT: Not necessarily -- in the corporation.</s>MARCHINI: OK. Thanks very much, Larry Seibert, portfolio manager at Barrett Associates, and Patricia Chadwick of Ravengate Partners. TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.