N W -- Rueters will have this out in the financial papers tomorrow.. Again playing UP the POSITIVE FWD statements. Smart move by CFO and Rueters..
By Nicole Volpe
CLEVELAND, April 25 (Reuters) - Compaq Computer Corp.
<CPQ.N> on Tuesday reported first-quarter earnings that met
expectations on essentially flat revenues, as the world's No. 1
personal computer maker struggled with a slow transition to
direct PC sales and a lingering Year 2000-related slowdown.
Compaq posted net income of $325 million, or 19 cents per
share including a 3 cent investment gain, compared with $281
million, or 16 cents a share, a year ago. The company's revenue
rose negligibly to $9.51 billion from $9.42 billion.
The consensus among financial analysts was for Compaq to
post earnings of 16 cents per share before one-time items,
according to research firm First Call/Thomson Financial, which
surveys broker estimates.
Shares rose 3-3/4 to close at 29-13/16 on the New York
Stock Exchange on above-average trading volume. Afterward, the
stock edged higher in composite U.S. trading to 30-1/4, up 4
points on the day.
The results were accidentally posted to the company's Web
site about 30 minutes ahead of their scheduled public release,
apparently giving certain investors a jump on the news, a
spokesman later said.
"Overall, I am pleased with our improved execution in the
quarter as the fourth to first quarter transition has
traditionally been challenging for us," Michael Capellas,
Compaq president and chief executive, said in a statement.
"While our revenue was affected by the early quarter
industry slowdown caused by the Y2K lockdown, a general
weakness in Europe, and continued efforts to reduce our channel
inventory, we met our earnings objectives," he added.
Compaq has been losing ground in sales of its personal
computers to faster-growing rivals such as Hewlett-Packard Co.
<HWP.N> and Dell Computer Corp. <DELL.O> and expanding into
booming markets for servers to balance falling prices in PCs.
"We do not underestimate the challenges that remain, but
our progress is evident from both our financial results and the
momentum we're gaining in the market," Capellas said. "We
believe this trend will continue in the second quarter and
accelerate during the second half of the year," he added.
Both Capellas and Compaq's new Chief Financial Officer
Jesse Greene said in a conference call with analysts and
investors that they were comfortable with Wall Street's
earnings and revenue forecasts for the rest of the year.
Analysts expect second-quarter earnings of 23 cents a share
compared with a loss of 10 cents per share in the year-earlier
quarter and for profits to increase steadily with each quarter.
The full year earnings consensus is expected to total $1.07 per
share vs. 32 cents in 1999, according to First Call.
"We are absolutely comfortable with estimates for the total
year from both a revenue and a profitability point of view,"
said Capellas.
Greene, a former Eastman Kodak Co. <EK.N> finance executive
who formally joined Compaq earlier this month, said he is
comfortable with revenue projections for a sequential second
quarter rise in revenues to $10.2 billion from $9.2 billion.
Capellas had cautioned investors in January to expect the
quarter to start slow, and to pick up midway into February with
the release of Microsoft Corp.'s <MSFT.O> Windows 2000, the
latest generation of its business software operating system.
Compaq has been gearing up its PC server business for
several years to prepare for the massive upgrade of computer
systems expected to come in the second half of this year as
Windows 2000 software becomes widely adopted by business.
Capellas was asked by an analyst during the conference call
to explain the apparent divergence between his confident
outlook on Windows 2000 adoption by businesses compared with
the dim view offered by Microsoft last week in its own report.
"I am more bullish," he said, calling Windows 2000 "a great
vehicle" for hardware sales.
Microsoft had warned analysts that revenue growth would
slow to around 15 percent in the coming quarters from rates
above 20 percent that analysts had been expecting, triggering a
sharp decline in its stock and a market sell-off on Monday.
Revenue in its enterprise group, which handles corporate
sales of powerful business computers, storage and related
technical services -- fell 4 percent compared with the first
quarter of 1999.
The company said its commercial PC group showed an
operating loss of $19 million in the quarter, down from a
profit of $24 million in the same period the year before. The
unit's $2.9 billion in sales was 30 percent of revenue.
"This business declined due to Y2K lockdowns, channel
inventory reductions, and a weak European market," Compaq said
in a statement.
Compaq said the fall in enterprise revenues was offset by
strong revenue growth in its consumer business, where sales
rose to $1.8 billion, up 35 percent from a year ago. The
computer maker also said it is taking aggressive steps to
reignite its business in Europe.
"Compaq is making incremental steps to improve its business
line," Gerard Klauer Mattison analyst David Bailey said. "But
they really have several hurdles going forward."
Bailey pointed out that the company's two largest
divisions, the enterprise systems group and the commercial PC
group, had lower revenue than a year ago.
"Part of this is due to Y2K, but, for example, there
doesn't seem to be any huge demand for (Compaq's) Alpha
servers," he said of computers that run Compaq's own Alpha
chips rather than mass-market chips from Intel Corp. <INTC.O>
"Revenue was up 1 percent, and earnings were flat," he
said. "The only group really growing is the consumer segment,
and they have the lowest margins," he noted.
((--Nicole Volpe, New York Newsdesk (212) 859-1700)) |
