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

To: hlpinout who wrote (89254)	1/25/2001 7:28:53 PM
From: hlpinout	Read Replies (2) \| Respond to of 97611

Sales of Handheld, Wireless Devices Helps Compaq Top Earnings Forecast Knight Ridder/Tribune Business Wire - Thursday, January 25, 2001 Jan 24, 2001 (Austin American-Statesman - Knight Ridder/Tribune Business News via COMTEX) -- It wasn't the slowdown in personal-computer sales that hurt Compaq Computer Corp. in the fourth quarter. The world's largest PC maker managed to post earnings slightly better than Wall Street's lowered expectations before a one-time charge for an ill-fated Internet investment. Houston-based Compaq reported fourth-quarter earnings of $515 million, or 30 cents a share, before the charge. A year ago, it earned $212 million, or 16 cents a share. Analysts had expected an average of 28 cents a share, according to First Call/Thomson Financial. But those results don't include a $1.8 billion-writedown from Compaq's 1999 sale of Internet search engine Alta Vista in exchange for stock in dot-com holding company CMGI Inc. CMGI's stock has plummeted from $110.63 a share to $6.56 Tuesday. Including the charge, Compaq posted a loss of $672 million, or 39 cents a share. Compaq's revenue was about $11.5 billion, up 10 percent from a year ago, and in line with expectations. For the year, net income was $1.7 billion, excluding the writedown and other one-time items, or 95 cents a share, compared with $569 million, or 34 cents a share, in 1999. Including the charge, earnings were flat. "Given the circumstances in the industry, the results are solid," said David Bailey, an analyst with Gerard Klauer Mattison & Co. The company said its sales of more profitable products, such as servers and storage systems, rose about 20 percent from a year ago and helped it weather the downturn in desktop PC sales. "We've been struggling for several years to be perceived as something more than a PC box pusher," said Michael Winkler, a Compaq executive vice president. "I think that came to pass this quarter. We get more than 50 percent of our revenue and 90 percent of our profit from products other than PCs." Consumer PC revenue was up just 4 percent from a year ago, and the division lost money, about $6 million, for the first time in more than four years. Compaq stood largely on the sidelines, refusing to go head to head with rival Dell Computer Corp. for PC sales where it might not make a profit. "A lot of our growth came from handheld devices and wireless devices, which are two or three times as profitable as desktops," Winkler said. "Those have insulated us from some pricing issues." But Compaq said it expects the first half of 2001 to be difficult as a price war continues and demand remains slow. While it expects revenue will be flat in the first quarter from a year ago, the company forecasts profits to increase about 30 percent, puzzling some analysts. "They expect to have a much better mix of higher-margin products," said Richard Chu, an analyst with SG Cowen Securities. "We'll see if that happens." But Compaq lowered its expectations for the year slightly, predicting earnings growth of 20 percent to 25 percent and revenue growth of 6 percent to 8 percent. But company officials said they expect revenue growth to be just 3 percent to 5 percent in the first six months of 2001. "I think it's going to make the second half a challenge," Bailey said. "They're banking on a rebound in the U.S. economy to drive sales. The longer the economic slowdown continues, the harder that becomes." By John Pletz To see more of the Austin American-Statesman, or to subscribe to the newspaper, go to austin360.com (c) 2001, Austin American-Statesman, Texas. Distributed by Knight Ridder/Tribune Business News.