November 18, 1997 5:40 PM PST

Analysts don't bother with Comdex

With a trained eye befitting their profession, Wall Street analysts are looking past the glitz and hype of Comdex and seeing that its influence is on the wane.

A number of market analysts are foregoing the trip to Comdex this year, noting that the return on their time investment and travel costs no longer warrants the effort involved.

Richard Chu, an analyst with Cowen & Company, contended that Comdex is diminishing in usefulness to the Street, which thrives on gathering little-known facts for forecasting a company's future performance.

"With all the zillions of people who are now attending, the chances of finding out something that no one else will know are pretty low," said Chu, who chose not to attend Comdex this year.

"In the early days of the industry, Comdex was the venue at which major new product announcements were made," added Sanjiv Hingorani, an analyst with Furman Selz. "It was important to be at Comdex to get wind of products."

But as the industry moved to shorter product cycles, down from a year to only three months in most cases, Comdex (a name that's derived from "Computer Dealers Expo") has lost its luster as the place to view major releases, Hingorani said, noting that he has skipped the event since 1990.

Moreover, many analysts rarely come away from Comdex with a change in earnings estimates, or changes in buy-sell recommendations, for the companies they track.

Despite Comdex's numerous product demonstrations and rollouts and in spite of scads of executives on hand to hold court with analysts, only one company had generated a significant number of earnings estimate changes by the third day of the convention.

Storage maker Western Digital (WDC) had at least four analysts lower their earnings estimates after the company held a meeting with them at Comdex, according to Rob Gowen, a spokesman for First Call.

Despite the relatively few earnings estimates changes that come out of Comdex, analysts note that the stocks of many attending companies rise during the event.

So while Comdex may not be giving Wall Street as big a bang for its buck, analysts can still point to a few reasons to attend the annual show.

"Is it critical that I attend? No. Am I particularly enjoying it? No. But it's useful if I have specific things I want to accomplish," said Daniel Kunstler, an analyst with J.P. Morgan Securities.. "It's good for getting anecdotal information of product acceptance and excitement."

Yet Kunstler, who has dutifully made the arduous trip to Las Vegas, cautioned that it takes a certain degree of scrutiny to gauge whether any excitement generated is over the products or instead is over the scantily clad women demonstrating the latest, greatest gizmo.

Analyst Ashok Kumar, with Southcoast Capital, and Philip Rueppel, with Alex. Brown, said Comdex is useful to them in that it offers a chance to meet with a company's vendors, customers, and competitors.

"You can meet with a company's component manufacturer and see what time frame they are on and get a heads-up on when things will happen," said Kumar, who is attending this year's Las Vegas events. "Any incremental information gives you an advantage."

He added that Comdex also provides a means for gauging the sentiment of the market.

Rueppel, meanwhile, said that although it's been at least four years since he's had an earnings estimate change come out of Comdex, the event is good for gathering information on how a company is positioned against competitors.

He noted that the Comdexes of years past provided more of an opportunity to gather information on original equipment makers like Compaq, whereas much of the potential for intelligence-gathering at Comdex these days is focused on peripheral, graphics, and disk-drive companies.

 

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