Compaq says European sales pace to defy euro moves
(UPDATE: Adds analyst comments in paras 5-6)
By Reed Stevenson
MAIHAMA, Japan, Nov 2 (Reuters) - Compaq Computer Corp (NYSE:CPQ - news) said on Thursday it expects its personal computer sales in Europe to continue at the same pace in the October-December period as in the prior quarter, despite the weak euro.
Michael Capellas, chairman and chief executive of the world's number one personal computer maker, told a news conference: ``During the (third) quarter, revenue was up eight percent -- 21 percent in local currency terms -- and I think you'll see that trend continue in the fourth quarter.''
Compaq said last week its third-quarter profit surged on strong sales across all product lines, but warned fourth-quarter profit would be hurt by a weak euro.
Weakness in the single European currency, which reduces corporate earnings when converted into dollars, has weighed down profits at other big technology companies such as International Business Machines Corp. (NYSE:IBM - news) and Intel Corp. (NasdaqNM:INTC - news).
That in turn has helped spark global jitters over technology stocks. In the last three months, the Nasdaq -- which has a high concentration of technology stocks -- has dipped around nine percent.
Mizuho Securities senior analyst Kazuya Yamamoto said the weak euro is also hitting Japanese firms selling in Europe -- such as Sony and its VAIO personal computer -- particularly hard.
``It is coming to the point where they are re-thinking their production strategies,'' Yamamoto said.
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Capellas said Compaq was prepared for the risk of continued euro weakness in the October-December period.
``We hedged the euro very early in the quarter -- it looks like a pretty good strategy.''
The weak European currency would lop as much as $100 million from pretax profits in the fourth quarter, the Houston-based computer maker said last week.
Growth in industry-wide sales of personal computers in Europe remained at historic lows in the third quarter on a unit basis, according to the latest figures from research firm Dataquest, a unit of the Gartner Group.
It said shipments in the period rose 9.9 percent year-on-year to 8.1 million units, falling short of the long-term average growth rate around 15 percent as businesses curbed large orders while the weak euro made imported PCs relatively expensive.
Capellas added that Compaq was also diversifying its product line to deal with the slide in demand for traditional PCs.
``I think we are being sensitive to what the (European) market needs. And we are putting the right products into the market,'' he said, referring to a variety of Internet appliances it has launched under the iPAQ brand name. |
