Compaq Computer Corp. reported earnings Monday for its fiscal first quarter, meeting the low end of its revised estimates, but falling short of analyst estimates by a penny.
Revenue for the quarter ending March 31 dropped three per cent from the same quarter a year ago, due mainly to a large decline in U.S. sales. But the company avoided what could have been an even more disappointing quarter thanks to strong growth elsewhere in the world, Compaq said in a statement.
The company also said Monday that it would lay off 2,000 workers around the world, in addition to the 5,000 jobs it said it would ax in March.
Compaq reported earnings of US$0.12 per share on revenue of $9.2 billion, excluding one-time charges for restructuring, net investment income and taxes. That compares to $0.17 per share on revenue of $9.5 billion in the first quarter a year ago.
Net income for the quarter totaled $200 million, compared to $296 million in the year-ago quarter.
The consensus of 21 analysts polled by First Call/Thomson Financial estimated Compaq to earn $0.13 per share on $9.1 billion.
Analysts had expected Compaq to profit by $0.18 a share before it warned on March 15 that it would fall short of its previous earnings estimate. The company revised its first-quarter earnings from $0.12 a share to $0.14 a share and projected revenue of $9 billion to $9.2 billion, four per cent less than its fiscal first-quarter 2000 results. It was the second consecutive quarter Compaq issued a warning.
At the time, Compaq said it would cut 5,000 jobs, or about seven per cent of its workforce. The company added another 2,000 jobs, or three per cent, to that figure Monday, the majority of which will be cut by the end of next week, Compaq’s new chief financial officer, Jeff Clarke, said in the company’s earnings conference call Monday.
While the number of layoffs increased, the company said its expected savings from the staff reduction would remain unchanged.
“The absolute savings is about the same, but the real effect is it is happening faster,” CEO Michael Capellas said during the conference call.
The company reported a one-time charge of $249 million related in part to those layoffs, in addition to a $75 million gain from net investment income and taxes. Meanwhile, Compaq said it would show a gain of about $120 million in the first quarter from the sale of its investment in Road Runner, a high-speed Internet access service in which Compaq had a small stake.
Shrinking demand for PCs and a slowing economy are to blame for Compaq’s troubled quarter, the company said. Two research reports released last week from International Data Corp. (IDC) and Gartner Group Inc.’s Dataquest, show that growth in worldwide PC sales has slowed to between 2.8 per cent and 3.5 per cent for the year. Sales in the United States declined 9.5 per cent, according to IDC, whose parent company International Data Group Inc. also owns the IDG News Service.
Both reports also said that Dell Computer Corp. surpassed Compaq in worldwide market share. Compaq shipped 3.9 million units around the world, Gartner said, giving it a market share of about 12 per cent. Roughly 1.5 million of those PCs were shipped in the U.S., giving Compaq a 14 per cent market share in the United States, according to Gartner.
The figures affect Compaq’s financial results because PC sales account for more than half of Compaq’s revenue, the company said. Revenue from the division that includes PC sales fell seven per cent from the same quarter a year ago. The remainder is derived from the sale of servers, storage and services. Throughout the quarter Compaq has announced a number of new efforts in the wireless, server and storage spaces. The company also launched its iPaq Pocket PC in Japan and unveiled upgrades to the model already on sale in the United States.
Revenue outside of the United States grew 17 per cent, as adjusted for currency, to account for 61 per cent of the company’s total revenue. Europe, Middle East and Africa saw growth reach 14 per cent. Japan was up 31 per cent. Asia Pacific grew 19 per cent, Latin America grew 17 per cent and China reported a six-per cent gain.
Shares of Compaq (CPQ) fell $0.86, or four per cent, to close at $20.65 on the New York Stock Exchange in anticipation of its earnings announcement.
Compaq, based in Houston, Tex., can be reached at http://www.compaq.com.
