(UPDATE) Compaq's Net Edged Estimates; Firm Sees Solid Growth In 4th Quarter
Dow Jones Online News, Wednesday, October 14, 1998 at 09:38
NEW YORK -(Dow Jones)- Compaq Computer Corp. managed to edge past
Wall Street estimates in the third quarter as revenue skyrocketed 36%,
despite a drop in net profit as the company continued to integrate its
acquisition of Digital Equipment Corp. Meanwhile, the world's top
supplier of personal computers anticipates strong growth in the fourth
quarter.
Compaq (CPQ) reported net income of $115 million, or seven cents a
share, down 78% from year-ago net of $517 million, or 33 cents a share.
Still the results topped the mean estimate of analysts surveyed by First
Call, which was for earnings of six cents a share.
Revenue climbed to $8.79 billion for the latest quarter, the first
full period of operating the combined companies since Compaq completed
its acquistion of Digital on June 12.
Compaq said it took steps in the latest quarter to begin realizing
savings with Digital, adding that these integration activities are "on
track." The company sees the Digital acquisition adding to earnings as
early as the fourth quarter. It said it will continue with the necessary
actions in the fourth quarter to achieve additional synergies.
Compaq said sales out of distribution channels grew by 38% compared
with a year ago, which the company said was more than double the overall
market rate.
"We ... believe Compaq will achieve continued strong growth during
the fourth quarter," said President and Chief Executive Echard Pfeiffer
Pfeiffer.
General expenses doubled to $1.58 billion, and research and
development cots also doubled to $430 million.
The company said it ended the quarter with $4.4 billion in cash after
buying back about $180 million of stock and paying about $100 million of
restructuring costs.
Compaq Reports Third Quarter Results
BusinessWire, Wednesday, October 14, 1998 at 07:18
HOUSTON--(BUSINESS WIRE)--Oct. 14, 1998--
Digital Integration Activities On Track
Compaq Computer Corporation (NYSE:CPQ) today announced worldwide
sales of $8.8 billion for the third quarter ended September 30, 1998,
an increase of 36 percent compared to sales reported for the third
quarter of 1997. The Company reported a profit after tax of $115
million, or $.07 per share.
"The third quarter was the first full quarter of operating the
combined companies of Compaq and Digital," said Eckhard Pfeiffer,
Compaq's President and Chief Executive Officer. "The Compaq team took
decisive implementation steps during the quarter to begin realizing
synergies from the Digital acquisition. To date, the Digital
integration activities are on track."
According to Earl Mason, Compaq's Senior Vice President and Chief
Financial Officer, "Progress in integration and operational
initiatives can be seen on both the income statement and balance
sheet. Gross margins improved sequentially to 24.9 percent, and the
acquired services business had its strongest quarter in terms of
year-over-year revenue growth in over five years. On the balance
sheet, cash ended at $4.4 billion after buying back approximately $180
million of Compaq's common stock and satisfying approximately $100
million of restructuring obligations. Improvements in both Days Sales
Outstanding and Inventory Turns contributed to the continued strong
cash position."
Outlook
"Sales out of the distribution channels grew 38 percent over the
third quarter of 1997. We estimate this growth was more than two times
the market and believe Compaq will achieve continued strong growth
during the fourth quarter," said Pfeiffer. "With a significant portion
of the Digital sales force integration work accomplished, we are now
ready to more actively communicate with our customers on the total
capability of Compaq today."
"During the fourth quarter, we will continue the integration
process, taking the necessary actions to achieve additional
synergies," said Mason. "With strong execution of our integration
plans, we continue to believe earnings for the combined companies
should be accretive as early as the fourth quarter."
Company Background
Founded in 1982, Compaq Computer Corporation is a Fortune Global
100 company. Compaq is the second largest computer company in the
world and the largest global supplier of personal computers. Compaq
develops and markets hardware, software, solutions, and services,
including industry-leading enterprise computing solutions,
fault-tolerant business-critical solutions, networking and
communication products, commercial desktop and portable products and
consumer PCs. The Company is an industry leader in environmentally
friendly programs and business practices.
Compaq products are sold and supported in more than 100 countries
through a network of authorized Compaq marketing partners. Customer
support and information about Compaq and its products are available at
compaq.com or by calling 1-800-OK-COMPAQ. Product
information and reseller locations are available by calling
1-800-345-1518.
This release contains forward-looking statements based on current
expectations that involve a number of risks and uncertainties. The
potential risks and uncertainties that could cause actual results to
differ materially include the implementation of operations and systems
improvements, particularly those associated with the Optimized
Distribution Model; the operational integration associated with the
acquisition of Digital Equipment Corporation; inventory risks due to
shifts in market demand; timely development, production, continued
competitive factors and pricing pressures; market responses to pricing
actions and promotional programs; acceptance of the products; and
changes in product mix. Further information on the factors that could
affect the Company's financial results are included in its SEC
filings, including the quarterly report on Form 10-Q for the quarter
ended June 30, 1998, and the Form 10-Q for the quarter ended September
30, 1998, which will be filed shortly.
Compaq, Registered U.S. Patent and Trademark Office. Digital is a
registered trademark of Digital Equipment Corporation. Product names
mentioned herein may be trademarks and/or registered trademarks of
their respective companies. |
