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January 11, 1988

TANDEM LEADS WALL STREET DOWN ON FLAKY FRIDAY ON WARNING OF SOFT PERIOD SALES

By CBR Staff Writer

Tandem Computers Inc poured fuel on the flames as Wall Street headed south in the last hour of trading on Friday when it announced that revenues were unexpectedly soft in its fiscal first quarter to December. The Cupertino, California fault tolerant minicomputer builder said that while it hadn’t yet done all the sums, it appeared that US business in the quarter fell short of expectations, and declined to elaborate. With guidance from Tandem, analysts had been going for $28m to $31m net on sales of $290m to $300m, compared with $27.1m on $238m a year ago. The surprise announcement generated a bloodbath in Tandem shares, which plunged $6.25 to $20.375, for a 25% decline. The Dow Jones Industrial Average was off 7%, 140.58, to 1,911.31 Friday. Analysts refused to take the Tandem experience as a sign that the computer industry as a whole was heading into a decline, pointing out that for a company that trades on the imperturbability of its computer systems, Tandem has a paradoxical tendency to report sharp quarterly variances in its business. Tandem as yet has no explanation for the downtrend, but since it does substantial business is with Wall Street firms, it is possible that several orders were put on hold after Meltdown Monday.

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