(BSNS WIRE) Compaq Reports Record Fourth Quarter Revenue and Earnings; G
Compaq Reports Record Fourth Quarter Revenue and Earnings; Growth At Greater
Than Three Times the Market; Digital Acquisition Accretive
Business Editors/Technology Writers
HOUSTON--(BUSINESS WIRE)--Jan. 27, 1999--Compaq Computer
Corporation (NYSE:CPQ) today announced worldwide sales of $10.9
billion for the fourth quarter ended December 31, 1998, an increase of
48 percent compared to sales reported for the fourth quarter of 1997.
The Company reported a profit after tax for the quarter of $758
million, or $.43 per share.
"The fourth quarter revenue and earnings results represent new
records for Compaq and a key milestone in our successful integration
of Digital Equipment Corporation. Sales out of the distribution
channels grew 43% over the fourth quarter of 1997, a growth rate
estimated at over three times the market," said Eckhard Pfeiffer,
Compaq's President and Chief Executive Officer. "1998 was a year of
significant transformation for Compaq, and with our strong fourth
quarter results, we enter the new year with a great deal of momentum
and optimism."
"Achieving our goal of earnings accretion for the combined
companies of Digital and Compaq in the fourth quarter is a significant
achievement and reflects tremendous execution of our integration plans
to date," said Earl Mason, Compaq's Senior Vice President and Chief
Financial Officer. "The synergies from the Digital acquisition are
becoming more and more evident in our financial performance.
Sequential revenue growth in products was exceptionally strong, and we
continue to gain momentum in our service businesses. Gross margins
improved by a point and a half from the third quarter to 26.4 percent.
Operating expenses declined sequentially both in absolute dollars and
as a percent of revenue, ending the quarter at 18% versus 23% for the
third quarter. On the balance sheet, cash remained strong at $4.1
billion while inventory turns increased to 15.9 versus the 12.4
reported in the third quarter, and days sales outstanding improved by
2 days to 56. Return on invested capital grew significantly, from 7.5%
reported in the third quarter to 38.6 %. Our fourth quarter results
and the successful integration of Digital over the last six months
represent major steps along the way to truly becoming a 'New Breed'
computing company."
Outlook
"We continue to see strong demand for Compaq products and
services and the opportunity for continued market share gains and
revenue growth," said Pfeiffer. "With the majority of the Digital
integration now successfully behind us, we enter the new year ready to
completely unfold and deploy the strategy we have been working towards
for the past year and a half. From continued leadership in the
personal computer market to complete enterprise solutions and services
to an aggressive Internet focus led by our new AltaVista Company, we
are completely engaged as a full line Global IT provider and strategic
partner to our customers."
"As we enter the first quarter of 1999, we will maintain our
focus on the basics looking to improve both income statement and
balance sheet performance in support of continued growth in return on
invested capital," said Mason.
Company Background
Compaq Computer Corporation, a Fortune Global 100 company, is the
second largest computer company in the world and the largest global
supplier of computer systems. 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 800/OK-COMPAQ. Product information
and reseller locations are available by calling 800/345-1518.
Compaq, Registered U.S. Patent and Trademark Office. Product
names mentioned herein may be trademarks and/or registered trademarks
of their respective companies.
More financial information on Compaq is available at
compaq.com.
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COMPAQ COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
December 31, December 31,
1998 1997
------- -------
(in millions)
Current assets:
Cash and cash equivalents $ 4,091 $ 6,418
Short-term investments -- 344
Accounts receivable, net 6,998 2,891
Inventories 2,005 1,570
Deferred income taxes 1,602 595
Other current assets 471 199
------- -------
Total current assets 15,167 12,017
Property, plant and equipment,
less accumulated depreciation 2,902 1,985
Deferred income taxes 1,341 --
Intangible and other assets 3,641 629
------- -------
$23,051 $14,631
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,237 $ 2,837
Income taxes payable 282 195
Accrued restructuring costs 1,110 --
Other current liabilities 5,104 2,170
------- -------
Total current liabilities 10,733 5,202
------- -------
Postretirement and other
postemployment benefits 545 --
------- -------
Minority interest 422 --
------- -------
Stockholders' equity:
Preferred stock, $.01
par value (authorized:
10 million shares;
issued: none) -- --
Common stock and capital in
excess of $.01 par value
(authorized: 3 billion
shares; issued: 1,698
million shares at
December 31, 1998 and
1,519 million shares at
December 31, 1997) 7,270 2,096
Retained earnings 4,465 7,333
Treasury stock (at cost) (384) --
------- -------
Total stockholders' equity 11,351 9,429
------- -------
$23,051 $14,631
======= =======
COMPAQ COMPUTER CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Year ended Quarter ended
December 31, December 31,
--------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
(in millions, except per share amounts)
Revenue:
Products $ 27,372 $ 24,122 $ 9,145 $ 7,196
Services 3,797 462 1,714 127
-------- -------- -------- --------
Total revenue 31,169 24,584 10,859 7,323
-------- -------- -------- --------
Cost of sales:
Products 21,383 17,500 6,807 5,215
Services 2,597 333 1,181 88
-------- -------- -------- --------
Total cost of sales 23,980 17,833 7,988 5,303
-------- -------- -------- --------
Selling, general, and
administrative expense 4,978 2,947 1,561 850
Research and development
costs 1,353 817 429 217
Purchased in-process
technology 3,196 208 (38) --
Restructuring and asset
impairment charges 393 -- -- --
Merger-related costs -- 44 -- --
Other income and
expense, net (69) (23) (13) --
-------- -------- -------- --------
9,851 3,993 1,939 1,067
-------- -------- -------- --------
Income (loss) before
provision for income
taxes (2,662) 2,758 932 953
Provision for
income taxes 81 903 174 286
-------- -------- -------- --------
Net income (loss) $ (2,743) $ 1,855 $ 758 $ 667
======== ======== ======== ========
Earnings (loss) per
common share:
Basic $ (1.71) $ 1.23 $ 0.45 $ 0.44
======== ======== ======== ========
Diluted $ (1.71) $ 1.19 $ 0.43 $ 0.42
======== ======== ======== ========
Shares used in computing
earnings (loss) per
common share:
Basic 1,608 1,505 1,682 1,517
======== ======== ======== ========
Diluted 1,608 1,564 1,742 1,585
======== ======== ======== ========
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--30--KO/na*
CONTACT: Compaq Computer Corporation
Jim Finlaw, 281/514-6137
jim.finlaw@compaq.com
or
Alan Hodel, 281/518-8932
alan.hodel@compaq.com
or
Investor Relations, 281/514-9549
Fax: 1-800-433-2391
compaq.com
KEYWORD: TEXAS
INDUSTRY KEYWORD: COMPUTERS/ELECTRONICS COMED EARNINGS
INTERACTIVE/MULTIMEDIA/INTERNET
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