Pat: More details, FYI. :)Leigh
"The company has been playing catch up here against archrival Dell Computer Corp. , the leading supplier of PCs through direct distribution outlets such as telephone, and increasingly the Internet."
"Dell's booming business led it to surpass Compaq for the No. 1 spot in combined U.S. business and consumer PC shipments during the second half of 1999, although Compaq retained a commanding lead worldwide, according to industry market data."
marketwatch.newsalert.com
FOCUS-Compaq fourth-quarter net down 56 percent
Reuters Story - January 25, 2000 21:03
(recasts with CEO comment, analyst reaction, stock price update, adds details throughout, byline, previous HOUSTON)
By Eric Auchard
NEW YORK, Jan 25 (Reuters) - Compaq Computer Corp. on Tuesday said fourth-quarter net income fell 56 percent to $332 million, in line with lowered expectations, as the world's largest personal computer maker closed out a trying year.
Net income fell to $332 million, or 19 cents per diluted share, from $758 million, or 43 cents, in the year-earlier quarter.
The decline in profits occurred as Houston-based Compaq struggled to rebound from plunging PC prices, a management house-cleaning and the difficult time it has had in integrating several major acquisitions over the past two years.
The computer maker said fourth-quarter results benefited from an after-tax gain of $50 million on its portfolio of investments in other companies, which appeared to boost reported earnings by 15 percent, or nearly 3 cents per share.
Excluding the gains, the results were in line with the consensus of 16 cents per share among analysts surveyed by First Call/Thomson Financial.
Revenues fell 4 percent to $10.5 billion, as the effect of translating foreign currency into U.S. dollars trimmed results by 3 percentage points.
Following the report, which came after the regular trading session, Compaq shares fell to 31 in composite U.S. stock market trading, off 2 points from Monday's close. The stock had closed at 32-9/16 on the New York Stock Exchange.
Compaq President and Chief Executive Michael Capellas, who replaced former CEO Eckhard Pfeiffer after he was forced out earlier this year, said the company's revenues would grow roughly 15 percent in 2000 from $38.5 billion it generated in 1999.
Even so, he cautioned first-quarter revenue would decline compared with fourth quarter, the company's strongest season, when holiday sales of personal computers to consumers boomed.
"The first quarter will start out a little bit slow," Capellas told financial analysts in a conference call that came after the financial report. "We expect revenue to decline quarter-to-quarter due to seasonality."
"(Our) view of Q1 (first quarter) is somewhat conservative but we're confident of the year ahead," Capellas said, adding that he was comfortable with analysts' estimates at about $1.08 per share for 2000, the First Call survey consensus.
Kevin McCarthy, an analyst with brokerage Donaldson, Lufkin & Jenrette, said the results were in line with expectations and suggested the worst of Compaq's troubles were behind it. Over time, the stock could trade nearly 50 percent higher, he said.
"Near-term, the stock has no reason to go below 30 and will eventually go to 45," McCarthy said of firming interest in the shares among investors, many of whom see the company as the most undervalued among major-name technology stocks.
Sales of servers, the computers used to manage networks of other computers, accounted for 51 percent of total revenue and totaled $5.3 billion, down 3 percent from a year ago, Compaq said.
However, that represented a 8 percent increase from 1999's third quarter. The segment, which generates most of Compaq's profits, realized operating income of $714 million, off 17 percent on the year.
Compaq was hardest hit in the category for which it is perhaps best known -- commercial PCs -- where revenues amounted to $3.1 billion, down 19 percent from a year earlier, but up 15 percent from the third quarter.
The company has been playing catch up here against archrival Dell Computer Corp. , the leading supplier of PCs through direct distribution outlets such as telephone, and increasingly the Internet.
Dell's booming business led it to surpass Compaq for the No. 1 spot in combined U.S. business and consumer PC shipments during the second half of 1999, although Compaq retained a commanding lead worldwide, according to industry market data.
The unit, which accounts for 30 percent of total revenue, posted a fourth-quarter loss of $79 million, improving from an even steeper third-quarter loss of $169 million -- but a reversal from the $157 million profit in fourth quarter 1998.
The consumer PC business remained a bright spot, as the unit reported record revenue of $2 billion, up 24 percent from the year-earlier period and up 34 percent from the third quarter.
Importantly for the future, the company said its push to derive a greater percentage of its revenue from items other than PC themselves -- such as software, peripheral products and Internet access -- was working, with growth at 50 percent.
Compaq benefited from the exit of rival PC makers from the U.S. retail market, including International Business Machines Corp. and Packard Bell NEC Inc., a division of Japan's giant NEC Corp. .
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