NY TIMES ........ April 19, 2002
In Swan Song, Compaq Posts a Small Profit
By CHRIS GAITHER
Compaq Computer, the No. 2 maker of personal computers after Dell Computer, posted a slim first-quarter profit yesterday despite a sharp drop in revenue.
In what its executives called probably their last earnings call before the closing of their acquisition by Hewlett-Packard, Compaq reported a profit of $44 million, or 3 cents a share, on sales of $7.7 billion. In the period last year, Compaq had sales of $9.2 billion but posted a loss of $131 million, or 8 cents a share, as it restructured to deal with the slowing economy.
The earnings release came a day after Hewlett-Packard said that independent inspectors had confirmed a narrow victory in the fight for shareholder approval of the Compaq deal. Excluding $35 million in extraordinary charges related to the merger efforts, Compaq said it earned 4 cents a share, solidly beating analysts' expectations of a penny a share.
Compaq declined to issue a forecast for the coming quarter because it does not expect to be a stand-alone company then.
"Given our expectation that the merger with H.P. will close in the next few weeks, this is likely to be Compaq's last earnings call," said its chief executive, Michael D. Capellas, who will be president of the new Hewlett-Packard. "The next time we talk, we'll be discussing the financial results of the combined company."
The merger still faces significant hurdles, however. Walter B. Hewlett, the dissident director of Hewlett-Packard who led a proxy fight against the $24 billion deal, plans to ask for a partial or complete recount of the tally by IVS Associates of Newark, Del. He has also asked a court in Delaware to throw out some of the votes, contending that Hewlett-Packard won them improperly.
Yet, perhaps preoccupied with other computer makers like Sun Microsystems and Gateway, which also reported earnings yesterday afternoon, Wall Street analysts appeared ready to let Compaq fade quietly into Hewlett-Packard. In the question-and-answer session that followed prepared remarks by Compaq executives, only two analysts, instead of the usual dozens, asked questions. The call ended in 20 minutes, less than one-third the usual time.
In regular trading before the earnings announcement, shares of Compaq rose 14 cents, to $10.82.
Hewlett-Packard wants to merge with Compaq to build strength for a fight with Dell in PC's and low-end servers and with I.B.M. over high-powered computing and consulting services. A report today by the International Data Corporation, a research company in Framingham, Mass., showed that Dell had widened its lead in personal computers.
The industry showed glimmers of the beginning of a gradual recovery. First-quarter PC shipments around the globe declined 2.7 percent, to 31.4 million, over the previous year. In the United States, shipments declined only 0.4 percent. International Data expects the United States to lead a surge in PC sales when the economy recovers, perhaps late this year or in 2003.
"The expectation is, it gets better from here," said Roger Kay, an analyst with the company. "It has been pretty bad." |
