Compaq turned to profit in 4th quarter

Compaq Computer Corp. Wednesday posted financial results for the fourth quarter of 2001 that beat analysts' expectations and its own earlier revenue estimates, though revenue still lagged behind its performance of a year earlier.

The company reported net income of US$92 million, or $0.05 per share, on revenue of $8.5 billion for the quarter, according to a company statement. Excluding a one-time charge for merger-related expenses, Compaq earned $0.06 per share in the quarter, ended Dec. 31, 2001.

Although revenue showed a sequential boost of about 14 percent from a dismal third quarter, it was down 26 percent from the fourth quarter of 2000, the company said.

Analysts polled by Thomson Financial/First Call had expected the company to post earnings per share of $0.01 for the quarter, on revenue of just over $8 billion.

Earlier this month, Compaq revised its previous, gloomy forecast for the quarter, saying the company would turn a profit on revenue of about $8 billion after a loss in the third quarter.

For the full year, Compaq reported a net loss of $785 million, or $0.47 per share, compared with a net profit of $569 million, or $0.33 per share, for 2000. Revenue dipped 21 percent to $33.5 billion, from $42.2 billion the previous year. Excluding special items, net income for the year was $256 million, or $0.15 per share, the company reported.

The company expects moderate growth over the first half of this year as corporations focus on making their IT infrastructures "bulletproof" in the wake of the Sept. 11 attacks, Chief Executive Officer Michael Capellas said in a conference call with press and analysts. Compaq projects revenue of $7.6 billion in the first quarter, he said.

Capellas voiced continued support for Compaq's proposed merger with Hewlett-Packard Co. (HP), which is expected to go to a shareholder vote next month but has run into opposition from major HP shareholders. The deal remains the best way to move Compaq's business forward, he said.

"The merger will make the combination an even more strategic partner for its customers," Capellas said.

In the fourth quarter, revenue grew more abroad than in the U.S., with a 22 percent gain outside the U.S. led by Europe and Latin America, the company said. Compaq expects the European market, which led with 31 percent revenue growth, to remain stronger than the U.S. in the first quarter, said Peter Blackmore, executive vice president of sales and services at Compaq.

Results improved in the fourth quarter in the company's enterprise, services and access businesses, Capellas said. The access business includes conventional PCs, Internet access products and technologies, entertainment devices and personal wireless mobility products.

The third quarter ended Sept. 30 saw a weak economy, disruptions caused by the Sept. 11 terrorist attacks and a severe typhoon in Taiwan knock Compaq to a loss of $0.07 per share.

"2001 was the most difficult year ever for the PC business," with revenue down across the industry, Capellas said.

Ongoing declines in PC prices now are being offset somewhat by upward price pressure on some components, including DRAM (Dynamic Random Access Memory) and flat-panel displays, as well as CD-RW (CD-Rewritable) drives, of which there have been some shortages, Compaq officials said.

Initiatives within Compaq to reduce inventory and operating expenses have improved the company's ability to make money and will continue, officials said.

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Stephen Lawson

Computerworld
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