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Compaq 4th-Quarter Profit Rises 83% on Server Sales
(Update1)
1/23/01 3:11 PM
Source:Bloomberg News
Houston, Jan. 23 (Bloomberg) -- Compaq Computer Corp., the world's largest personal-computer
maker, said fourth-quarter profit rose 83 percent as sales of powerful servers helped make up for
slower PC purchases by consumers and small businesses.
The company's shares jumped 16 percent on the news. Profit from operations rose to $515 million, or
30 cents a share, from $282 million, or 16 cents, a year earlier. Sales climbed 10 percent to $11.5
billion from $10.5 billion, Compaq said in a statement.
Compaq cut its earnings estimate in October because of slowing
demand in Europe, then lowered its forecast again last month as it
became clear that PC sales weren't getting the traditional holiday
boost. Yesterday, rival Dell Computer Corp. said its fiscal fourth-
quarter sales and profit wouldn't meet estimates after price discounts
failed to spur demand.
''Compaq is managing more for profit than for market share,'' said
Stephen Dube, an analyst with Wasserstein Perella Securities, who
rates Compaq a ''buy.'' ''Dell clearly was out for market share.''
Profit at Houston-based Compaq beat an average earnings estimate of
28 cents from analysts polled by First Call/Thomson Financial. Some
estimates on the Internet were as high as 30 cents.
The company's shares climbed as high as $23.25 after the report.
They rose 23 cents to $20.05 before the earnings release. The stock
has risen 33 percent this year.
Server Computers
Compaq now gets less than half of its sales from desktop personal computers. Sales of servers, the
big machines that run networks and Web sites, surged 20 percent to $4.11 billion for the quarter.
Operating income for the product line rose 64 percent to $722 million.
That countered slower growth in consumer PC sales, which rose 3.5 percent to $2.04 billion. The unit
reported an operating loss of $6 million, compared with a profit of $69 million a year earlier.
Compaq reported an operating profit of $113 million for commercial PCs, compared with a loss of $79
million a year earlier. Commercial PC sales rose 11 percent to $3.47 billion.
Revenue from computer services fell 4.8 percent to $1.81 billion.
Slump in Demand
PC makers have been unable to boost demand for their products in recent months, even as they
offered discounts and other promotions to lure buyers. Two weeks ago, Gateway Inc., the first PC
maker to report fourth-quarter results, said profit was a third of what it had forecast and reduced its
2001 growth targets for a second time.
''The first quarter is in question; after that, business should accelerate,'' said David Katz, chief
investment officer for Matrix Asset Advisors, which owns 574,000 Compaq shares.
A $1.8 billion charge in the recent quarter for the writedown of Compaq's investment in CMGI Inc.
resulted in a loss of $672 million, or 39 cents a share. An investment gain of $50 million in the
year-earlier quarter resulted in net income of $332 million, or 20 cents.
Compaq owns 42 million CMGI shares, a 13.2 percent stake. The company got the shares as part of
its sale of the Alta Vista Internet search engine in August 1999. CMGI shares plunged 96 percent
last year. |
