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06 Dec 2000
MOODY'S CONFIRMS COMPAQ COMPUTER CORP'S LONG-TERM AND SHORT-TERM DEBT RATINGS AT Baa2 AND P-2. OUTLOOK POSITIVE
Approximately $500 Million of Debt Securities Affected
New York, December 06, 2000 -- Moody's Investors Service today confirmed the long-term and short-term
debt ratings of Compaq Computer Corp at Baa2 and P-2, respectively.
The confirmation follows Compaq's announced authorization to execute a
$1 billion share buyback program. In light of the new authorization
the company has suspended its systematic repurchase program which it has
used to offset earnings dilution due to the exercise of stock options.
The outlook continues to be positive.
The confirmation reflects Compaq's strong cash position and overall liquidity,
as well as its lowly leveraged balance sheet. As of the quarter
ended September 30, 2000, the company had $2.9
billion in cash and cash equivalents, and over one third of its
$26 billion of assets were in cash, cash equivalents,
and accounts receivable. Meanwhile, the company's debt stood
slightly above $1 billion which, when combined with the improving
cash flows and overall operations at Compaq, give it enough financial
flexibility to support the stock buyback without impairing the credit
rating or outlook.
Ratings confirmed include the following:
Compaq Computer Corporation - $3.0 billion bank debt
due 2002, rated Baa2; $500 million senior notes due
2002 and 2005, rated Baa2; and $2.0 billion shelf
registration, rated (P)Baa2 for senior debt, including medium
Compaq Computer Corporation - $1.5 billion commercial
paper program at Prime-2.
Compaq Financial Services Corporation - $1.0 billion
commercial paper program at Prime-2.
Moody's noted that the diversification of operations at Compaq into the
enterprise and service spaces, and the strength of those diversified
operations, help moderate the ongoing pricing flux of the consumer
and commercial segments. The personal computer sector, from
which Compaq derives a significant portion of its revenues, has
recently come under incremental pricing pressures as the uncertain holiday
demand picture continues to unfurl. The rating agency noted,
however, that such pricing pressures within the consumer and commercial
arenas have been an industry hallmark for the last several years.
Moody's believes Compaq's restructured operations are in a much stronger
position to be able to manage through such pressures successfully than
they had been historically.
Significant challenges remain, however, including continuing
to drive top-line growth in an intensely competitive environment.
Simultaneously, Compaq must create additional efficiencies in operations
to prevent margin erosion, as well as continue to invest in new
products, given the short life cycles of those in the consumer and
commercial arenas. Other challenges include better integrating
and leveraging information-technology services into the enterprise
solutions and services segment, and improving momentum and mind
fshare in the fast-evolving market for net-centric computing
The positive rating outlook reflects our view that evidence is building
that Compaq has achieved the beginnings of a sustainable turnaround which,
if extended, and also combined with the maintenance of a highly
liquid and lowly leveraged balance sheet, could exert upward rating
momentum over time.
Compaq Computer Corporation, based in Houston, Texas,
is a global information technology company, and is the largest worldwide
supplier of computing systems.
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
Richard J. Lane
VP - Senior Credit Officer
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
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