Compaq reports loss after troubled quarter

Compaq failed to meet lowered earnings expectations for the third quarter, following a streak of bad luck that chief executive...

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Compaq failed to meet lowered earnings expectations for the third quarter, following a streak of bad luck that chief executive officer Michael Capellas called "the perfect storm."

For the third quarter ending 30 September, Compaq reported revenues of $7.5bn (£3.99bn), a 33% drop from the previous year. The company's net loss from operations was $120m (£84m), which translates into a loss of $0.07 per share. Analysts had expected the company to report a loss of $0.06.

Compaq's overall net loss was $499m (£350m), or $0.29 per diluted share, a dramatic reversal from the year-earlier quarter, when it reported net income of $557m and earnings of $0.31 per diluted share.

Capellas claimed the third quarter was a tough one for the company. In addition to the terrorist attacks in the US, which temporarily grounded all air shipments, there was also a major typhoon in Taiwan. These issues combined caused the company to lose the equivalent of a week's worth of business.

Compaq expects things to brighten during the next quarter. Capellas estimated that fourth-quarter revenue would be in the range of $7.6bn to $7.8bn (£5.4bn). He estimated the company would report a loss of about $0.03 per share.

The anticipated fourth-quarter loss would reflect a weak market and increasingly competitive pricing in Japan and Europe, Capellas.

Capellas predicted that North America will begin to stabilise in the fourth quarter, with some stabilisation in Europe, but Japan shows signs of continued weakness.

Although the enterprise market is beginning to show signs of recovery following the terrorist attacks, Capellas warned not to read too much into the growth, because business essentially stopped following the attacks. "There is no question that commercial customers are back in business," he said. "We really are seeing more business as usual, but I'm not saying that we see robust recovery here."

Compaq is also expecting more spending on IT infrastructure in 2002 than previously was anticipated, a direct result of the attacks, he said.

Before the results were released, Compaq's share price fell by 2.6% to $9.40 (£6.59).

Further information
Compaq: www.compaq.com

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