UPDATE: Compaq to cut 5,000 jobs, local effect unknown

Compaq Australia is down-playing its US parent's announcement on Thursday the company is set to cut 5000 jobs worldwide due to overall weakness in the US economy.

The first phase of cuts will take place over the next four to six weeks, Compaq chairman and chief executive Michael Capellas told US Computerworld.

As reported yesterday, the cuts come as a result of "continued overall weakness in the US economy," Capellas said.

The company projected no growth for this fiscal quarter and lowered its earnings estimate for this period, estimating revenue to be between $US9.0 and $9.2 billion, about 4 percent below the same quarter last year.

A Compaq Australia spokesperson could not provide a local revenue estimate for this fiscal quarter.

Though Capellas said the US consumer and business desktop PC market "has been hit the hardest," he said server and small business sales have also dropped off. He did note, however, that Compaq continues to do well in the storage and Unix markets.

The company said it plans to eliminate about 5,000 positions, or 7 percent of its workforce worldwide, primarily from the new Access unit formed by the consolidation of its consumer and commercial product groups, as well as jobs from the supply chain and marketing organization. Compaq expects to save between $500 million and $600 million per year through the moves, Capellas said.

Compaq said it will take a restructuring charge of $US125 million to $150 million in the first quarter resulting from the consolidation, while recognizing about $120 million from a one-time gain primarily from the sale of the company's investment in the Road Runner joint venture.

Compaq Australia would neither confirm nor deny if the cost-cutting regime would impact the local business, maintaining it was "too early" to speculate what the effect, "if any," would be on Australian or regional staff," or what proportion of cuts would impact permanent or temporary employees. "We're standing back and working out what the US announcement means for the local business," the spokesperson said.

According to Cappellas, the second phase of global job cuts will happen over the balance of the year.

Compaq Asia Pacific vice president and managing director Paul Brandling was not available for comment.

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