Compaq Expects a Loss for Quarter
As It Moves to Realign Its Business
An INTERACTIVE JOURNAL News Roundup
HOUSTON -- Compaq Computer Corp., still struggling amid shifts in the personal-computer industry, said it expects to post a second-quarter loss and unveiled a restructuring that will require a big third-quarter charge.
The giant maker of PCs, which ousted its chief executive officer after a disappointing first quarter, predicted a loss of 15 cents a share for the quarter. The news surprised Wall Street analysts, who had predicted Compaq, despite its problems, would post a 20 cent a share profit.
Moreover, Compaq said it will record a substantial charge in the third quarter to cover the costs of what it termed a "realignment" of its business. That revamp is expected to eliminate $2 billion in ongoing operating costs, it said. It didn't estimate the size of the planned third-quarter charge.
"The operational issues that affected Compaq in the first quarter continued to influence our business this quarter," said Benjamin M. Rosen, chairman and acting chief executive officer, in a statement. "Pricing pressures in the PC segment, inadequate revenue growth and a noncompetitive cost structure are the contributing factors to our expected shortfall," he said.
Analysts, in the past, have faulted Compaq for not moving more quickly to implement a so-called build-to-order manufacturing plan, a direction that has been taken by the PC industry as companies complete more sales directly with customers -- via the Internet, for instance.
Mr. Rosen said revenue and gross margin are expected to be flat to down sequentially from the first quarter, while operating expenses will increase from the first quarter, partly because of goodwill amortization costs associated with Compaq's recent Internet-related acquisitions.
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