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To: pat mudge who wrote (31527)	1/21/1998 7:29:00 PM
From: Glenn D. Rudolph	Read Replies (1) \| Respond to of 61433

Compaq CFO sees strong profit growth ahead Reuters Story - January 21, 1998 11:43 %DPR %US %RES %RESF CPQ V%REUTER P%RTR By Richard Melville NEW YORK, Jan 21 (Reuters) - Compaq Computer Corp expects strong results in North America and Europe to offset any weakness the company experiences in Asia over the next six months and allow it to maintain solid earnings growth, its chief financial officer said Wednesday. Earlier, Compaq reported fourth-quarter net income rose 37 percent to $667 million, or $0.84 per share, from $487 million, or $0.63 per share in the same period a year earlier. The company's earnings per share, which beat First Call's consensus analyst estimate by a penny, were driven by strong gains in North America and Europe, both of which produced unit sales gains of 52 percent. Those increases came as unit sales declined in Japan by 16 percent and in Asia by one percent. "When you look at the first quarter and even the second quarter, I see that same type of thing happening, where you've got good performance out of North America and Europe offsetting the Asia stuff," Compaq CFO Earl Mason said. "Actually, more than offsetting." Compaq's growth has come amid a consolidation of market share in the company's personal computer business. Mason said the company's unit sale gains in Europe surpassed those of the industry, which showed a roughly 10 percent increase there. In North America, industry growth ran in the mid-teens. As that consolidation continues, pricing pressures have become more intense, particularly in the consumer arena, where several companies have systems priced below $1,000 on the market. Compaq's goal is to increase its annual revenues to $50 billion by the year 2000. By that time Mason expects "enterprise" computers, which include servers, workstations and other such products, will comprise half of total revenues, up from about 37 percent at present. "A lot of people will be migrating to (Microsoft's) Windows NT to solve the year 2000 problem," Mason said. "You'll see a lot more of the capital budget to solve that problem." Such a migration would mean more dollars spent to install higher-end PC servers and clustered servers such as the ones made by Compaq's recently-acquired Tandem unit, Mason said. For Compaq, the shift would boost profit growth because the higher-end products draw fatter profit margins, he said.