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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: MikeyT who wrote (84291)	8/18/2000 1:44:37 PM
From: Night Writer	Read Replies (1) \| Respond to of 97611

INTERVIEW-Compaq UK sees strong H2 services arm recovery By Lucas van Grinsven, European Technology Correspondent London, Aug 18 (Reuters) - The British arm of U.S. computer company Compaq <CPQ.N> said on Friday it expects a strong recovery in revenues at its services arm in the second half of this year, after a disappointing first half in the wake of Y2K. "I'm very bullish," Rene Schuster, Compaq's new chief executive for Britain and Ireland, told Reuters in an interview. "I expect the services arm to grow by 12 percent year-on-year right now. If we get a fair wind, we'll even exceed that in the fourth quarter," he added. Growth would be back at year-ago levels Schuster said. His outlook is a marked change from the lacklustre first half. Compaq's global services arm, generating 17 percent of the company's total revenues, saw sales drop by four percent in the second quarter while operating profit fell by $32 million to $228 million, or 13 percent of revenues. The second quarter was worse than the already disappointing first quarter when services revenues grew by just two percent, in an industry which has grown used to 10-15 percent sales increases year-on-year. The slump is an industry-wide phenomenon. Most large computer integrators and consultancy firms have reported lower sales as their corporate customers had upgraded computer systems ahead of the millennium and were now sitting back and reap the rewards. Analysts noted that companies have discovered they can do their business without continuous upgrades of their standard computer infrastructure. PC SALES SLOW Not only the services industry has suffered because of this, unit sales growth of PCs has fallen to single digit figures in the first half year in Europe, the lowest growth since the start of the PC industry twenty years ago. But new computer applications, such as e-commerce, will reach the main market this year, and will push the computer industry out of its standstill, Schuster said. E-commerce attack plans from traditional companies are precisely the reason why he sees demand picking up for services, and in its slip stream large server and storage computers that will drive these applications. "My expectation that we have the potential to outperform in the fourth quarter is based on several big deals that should come through in the coming months," he said. "In the past months the brick-and-mortar companies have been in discovery mode. They have done a lot of analysis and tried to figure out what solutions makes sense and which ones have the best pay-back time. This discovery phase is now complete," Schuster added. What has helped underpin willingness to invest is that software companies such as Oracle and CommerceOne have been able to show successful installations of their e-commerce and e-procurement products that can sharply reduce transaction costs and red tape. Schuster, who has a background in the computer services and consultancy industry, expects that Compaq will have solved most of its integration problems of Digital, which was acquired over two years ago and which had a strong services unit. With the computer part of the business finally working more closely with the services arm, both units will increase each other's sales, Schuster said. "We have openly stated that we didn't integrate very well. But we're coming through the back end of that," he said. ((Europan equities desk, +44 20 7542 8825, fax +44 20 7542 3722, e-mail: lucas.grinsven@reuters.com)) REUTERS * end of story *