Compaq Reports First Quarter Results; Significant Customer Commitments
Highlight Quarter
HOUSTON, April 18 /PRNewswire-FirstCall/ -- Compaq Computer Corporation
(NYSE: CPQ), a leading global provider of enterprise technology and solutions,
today reported financial results for the first quarter ended March 31, 2002.
Revenue for the quarter was $7.7 billion, while net income was $44 million, or
$0.03 per diluted common share. Excluding merger-related expenses, the
company earned $0.04 per diluted common share.
"Our first quarter results continue to demonstrate Compaq's strong focus
on customer success, on winning in key markets and on execution during what
continues to be a challenging economic environment," said Michael Capellas,
Compaq's chairman and chief executive officer.
"Capital spending pressures are causing the IT market to move aggressively
toward industry-standard solutions where Compaq is the market leader,"
Capellas continued. "Our continued focus on the customer has yielded more
than $1 billion in major account wins in this quarter alone across the
financial services, government, education and healthcare industries -- serving
as an endorsement to our business strategy and proof of our customer
commitment. And we have not backed off an inch from making steady
improvements to our business model."
Recent customer wins include:
-- Department of Veteran's Affairs (VA) -- Inclusion in a $1.375 billion
Procurement of Computer Hardware and Software-2 (PCHS-2) multi-vendor
contract to provide hardware, services, and enterprise-wide solutions.
Compaq revenues under the previous contract -- PCHS-1 -- totaled
approximately $500 million for products and services.
-- Kimberly-Clark Corporation -- A 3-year, $100 million global services
and technology agreement. Compaq will deliver desktops, notebooks,
iPAQ Pockets PCs, industry-standard ProLiant servers, and services to
28,000 users in 35 countries.
-- Houston Independent School District -- An end-to-end solution provider
agreement valued at up to $120 million. Covers innovative
technologies including iPAQ Pocket PCs; Blackberry wireless devices;
Evo laptops and desktops; industry-standard ProLiant servers; and
services. The exclusive 3-year contract includes options for two
1-year extensions.
-- Schlumberger -- Compaq and global technology services company
Schlumberger entered an expanded agreement to develop and offer joint,
global IT solutions combining their respective services and
technologies. Focused on markets where the companies have
complementary strengths -- oil and gas, finance, telecommunications,
transport, energy and utilities, and the public sector -- Compaq
estimates its revenues under the expanded agreement could exceed
$500 million over the next three to five years.
First quarter gross margin, as a percentage of revenue, was flat
sequentially at 20.6 percent, as improved product mix in the Access Business
Group, operational improvements in Industry Standard Servers and solid
execution in Global Services offset revenue weakness in Business Critical
Solutions. First quarter operating expenses were $1.4 billion, a sequential
reduction of $101 million, and down $359 million year-over-year. This
represents the fifth consecutive quarter of operating expense reductions.
"We are seeing the benefits of the operational and business model
improvements we made over the past year," said Jeff Clarke, Compaq's chief
financial officer. "Even as we prepare for Compaq's merger with Hewlett-
Packard, we have demonstrated a relentless focus on execution that bodes well
for the operations of the combined company."
In the same quarter last year -- the company's strongest in 2001 -- Compaq
reported revenue of $9.2 billion. Adjusted for special items, net income on
an operational basis was $214 million, or $0.13 per diluted common share.
Including special items, reported net loss was $131 million, or ($0.08) per
diluted common share.
Business Overview
Compaq Global Services continued to be the company's strongest segment,
posting segment operating profit of $229 million. Revenue for the quarter was
$1.9 billion, down 3 percent on a year-over-year basis and down 7 percent
sequentially, a normal seasonal decline. Global Services, which includes
customer support, managed services, system integration and financial services
and leasing, now comprises 24 percent of Compaq's revenue.
Revenue from the Enterprise Computing segment -- built on the pillars of
fault-tolerant and high performance computing, enterprise storage and
industry-standard servers -- was down 13 percent from the fourth quarter to
$2.4 billion, with segment operating profit of $18 million.
Revenue from the Industry Standard Server Group was $1.4 billion,
essentially flat with the fourth quarter of 2001. Gross margin percentage
improved sequentially by two points as the benefits of recent operational and
distribution model improvements continued to be realized. Sequential market
share gains are expected, particularly in North America. Compaq addressed
customers' needs for reduced costs, greater flexibility, and increased agility
by introducing the Compaq ProLiant BL e-Class blade designed for adaptive
computing, which achieves new levels of efficiency and cost savings in the
data center by balancing power, performance and space utilization.
In the Enterprise Storage Group, revenue was $394 million, down 13 percent
sequentially. Despite weak market conditions and an aggressive pricing
environment, gross margin percentage was essentially flat on a sequential
basis. As the low cost producer and leading technology innovator, Compaq's
open, modular solutions -- such as the StorageWorks family of products --
provide customers with a compelling price/performance equation. Compaq's
annual ENSA@work storage conferences, held this month in Europe and the United
States, attracted more than 2,000 delegates each -- a record customer turnout.
In the first quarter, the Business Critical Solutions Group -- comprised
of fault-tolerant and high performance systems -- revenue was $517 million,
down 33 percent sequentially, following a strong fourth quarter that included
three large supercomputer contracts. New customers comprised 16 percent of
revenue for fault-tolerant systems. A report released by IDC during the
quarter ranked Compaq the #1 vendor in high performance server revenue.
Compaq's leadership in this arena is reflected in a continuing wave of major
supercomputer contract wins in computer simulation and animation, as well as
other general research applications during the past 12 months.
Revenue in the company's Access business segment was $3.5 billion, a
decrease of 6 percent sequentially, and down 18 percent year-over-year. The
segment posted a loss of $36 million for the quarter, a sequential improvement
of $33 million over the fourth quarter, reflecting continued customer
acceptance of new products and continued business model improvements.
Commercial PC revenue grew 6 percent sequentially despite difficult market
conditions.
Earnings Conference Webcast
Compaq will host a live audio Webcast today at 5:00 p.m. Eastern
(4:00 p.m. Central) regarding its first quarter financial results. Details
and links to the Webcast can be found at compaq.com .
This conference call is the property of Compaq Computer Corporation and any
recording, reproduction, or rebroadcast of this conference call is expressly
prohibited by Compaq.
Company Background
Founded in 1982, Compaq Computer Corporation is a leading global provider
of information technology products, services and solutions for enterprise
customers. Compaq designs, develops, manufactures and markets information
technology equipment, software, services and solutions, including industry-
leading enterprise storage and computing solutions, fault-tolerant business-
critical solutions, communication products, personal desktop and notebook
computers, and personal entertainment and Internet access devices that are
sold in more than 200 countries directly and through a network of authorized
Compaq marketing partners. Information on Compaq and its products and
services is available at www.compaq.com .
FORWARD-LOOKING STATEMENT
Compaq and the Compaq logo are trademarks of Compaq Information
Technologies Group, L.P. This document contains forward-looking statements
that involve risks, uncertainties and assumptions. This document contains
forward-looking statements that involve risks, uncertainties and assumptions.
All statements other than statements of historical fact are statements that
could be deemed forward-looking statements. Risks, uncertainties and
assumptions include the possibility that the Hewlett-Packard/Compaq merger
does not close or that prior to the closing of the proposed merger, the
businesses of the companies suffer due to uncertainty; the market for the sale
of certain products and services may not develop as expected; that development
of these products and services may not proceed as planned; that Compaq and
Hewlett-Packard are unable to transition customers, successfully execute their
integration strategies, or achieve planned synergies; other risks that are
described from time to time in Compaq and Hewlett-Packard's Securities and
Exchange Commission reports (including but not limited to Compaq's annual
report on Form 10-K for the year ended December 31, 2001, HP's annual report
on Form 10-K for the fiscal year ended October 31, 2001, and subsequently
filed reports and HP's registration statement on Form S-4 filed on
February 5, 2002). If any of these risks or uncertainties materializes or any
of these assumptions proves incorrect, Compaq's results could differ
materially from Compaq's expectations in these statements. Compaq assumes no
obligation and does not intend to update these forward-looking statements.
COMPAQ COMPUTER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, December 31,
(In millions, except par value) 2002 2001
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $3,702 $3,874
Trade accounts receivable, net 4,147 4,623
Leases and other accounts receivable 1,957 1,881
Inventories 1,419 1,402
Other assets 1,440 1,498
Total current assets 12,665 13,278
Property, plant and equipment, net 3,171 3,199
Other assets, net 6,935 7,212
Total assets $22,771 $23,689
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings $1,666 $1,692
Accounts payable 3,350 3,881
Deferred income 1,191 1,181
Other liabilities 3,984 4,379
Total current liabilities 10,191 11,133
Long-term debt 600 600
Postretirement and other postemployment benefits 844 839
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value
Shares authorized: 10 million; shares
issued: none --- ---
Common stock and capital in excess of $.01
par value
Shares authorized: 3 billion
Shares issued: March 31, 2002 -
1,774 million 8,375 8,307
December 31, 2001 - 1,766 million
Retained earnings 4,394 4,393
Accumulated other comprehensive loss (182) (132)
Treasury stock (shares: March 31, 2002 -
62 million
December 31, 2001 - 62 million) (1,451) (1,451)
Total stockholders' equity 11,136 11,117
Total liabilities and stockholders'
equity $22,771 $23,689
COMPAQ COMPUTER CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three months ended March 31,
(In millions, except per share amounts) 2002 2001
Revenue:
Products $6,109 $7,480
Services 1,619 1,701
Total revenue 7,728 9,181
Cost of sales:
Products 4,969 5,893
Services 1,169 1,212
Total cost of sales 6,138 7,105
Selling, general and administrative 1,157 1,438
Research and development 286 364
Restructuring and related charges --- 249
Merger-related costs 35 ---
Other (income) expense, net 49 (106)
1,527 1,945
Income before income taxes 63 131
Provision for income taxes 19 40
Income before cumulative effect of accounting change 44 91
Cumulative effect of accounting change, net of tax --- (222)
Net income (loss) $44 $(131)
Earnings (loss) per common share:
Basic:
Before cumulative effect of accounting change $0.03 $0.05
Cumulative effect of accounting change, net
of tax --- (0.13)
$0.03 $(0.08)
Diluted:
Before cumulative effect of accounting change $0.03 $0.05
Cumulative effect of accounting change, net
of tax --- (0.13)
$0.03 $(0.08)
Shares used in computing earnings (loss) per
common share:
Basic 1,705 1,685
Diluted 1,718 1,685
COMPAQ COMPUTER CORPORATION
SEGMENT INFORMATION
(Unaudited)
Three months ended March 31,
(In millions) 2002 2001
Enterprise Computing
Revenue $2,351 $2,920
Operating income 18 144
Access
Revenue 3,545 4,346
Operating loss (36) (110)
Compaq Global Services
Revenue 1,882 1,935
Operating income 229 254
Segment Eliminations and Other
Revenue (50) (20)
Operating income (loss) (15) 20
Consolidated Segment Totals
Revenue $7,728 $9,181
Operating income $196 $308
A reconciliation of Compaq's consolidated segment operating income to
consolidated income before income taxes follows:
Three months ended March 31,
(In millions) 2002 2001
Consolidated segment operating income $196 $308
Unallocated corporate expenses (49) (34)
Restructuring and related charges --- (249)
Merger-related costs (35) ---
Other income (expense), net (49) 106
Income before income taxes $63 $131
MAKE YOUR OPINION COUNT - Click Here
tbutton.prnewswire.com
SOURCE Compaq Computer Corporation
-0- 04/18/2002
/CONTACT: Arch Currid of Compaq Computer Corporation, +1-281-514-0484, or
arch.currid@Compaq.com /
/Photo: newscom.com
PRN Photo Desk, +1-888-776-6555 or +1-212-782-2840/
/Web site: compaq.com
compaq.com /
(CPQ)
CO: Compaq Computer Corporation
ST: Texas
IN: CPR STW HRD
SU: ERN CCA MAV
*** end of story *** |
