InfoBeads: We called it

If you examine Compaq's (NYSE:CPQ) numbers, one can see the making of these earnings problems in the price curves that are found in the retail and dealer pricing levels. Prices have been in a constant state of decline for some time. Although that may not be news, there are new twists that make the situation worse in the short term.

However the key question is whether or not this situation -- or at least the serious earnings impact -- is limited to Compaq, or whether it will be reflected in other firms' earnings.

To be sure, there are issues that affect all vendors. The reality is that the demand curves are lower than they've been in some time. It's my sense that the direct vendors will fare somewhat better as they do more to "upsell" higher cost peripherals and are able to keep this money in house.

Compaq may have suffered because of share problems in the commercial and retail sales sectors. But while this is certainly bad news for Compaq, I'm not sure it's a harbinger for other computer makers.

All PC vendors are faced with demand and pricing challenges. Yet it appears that Compaq failed to meet analysts' estimates because of sinking market share. Clearly, Compaq would prefer to avoid this situation in the future and it will be interesting to see what the firm does to reverse its fading fortunes.