Compaq cuts further 4000

Compaq Computer will cut 4000 positions worldwide in its second bout of restructuring this year bringing the total number of planned cuts to 8500.

It is not known how the planned cuts will affect the Australian operation at this point. A spokesperson for the Australian operation said a further announcement on how the cuts will affect the local arm may be made when Compaq releases its worldwide financial results later this month.

Details of the cuts came as the company assured its investors that it expects to meet second-quarter earnings consensus of 4 cents per diluted common share, based on preliminary financial data.

Revenue for the second quarter will be down 9 per cent sequentially to about $8.4 billion. Compaq blamed worsening economic conditions in Europe for the drop in forecast revenue.

Compaq will take an additional restructuring charge of about $490 million in the second quarter, mostly related to the job cuts. The company expects to save $900 million on an annual basis from the cuts.

In an announcement to Compaq investors, Michael Capellas, chairman and chief executive officer, said he was pleased with the company's progress in tough market conditions. "We reduced quarterly operating expenses to their lowest level in three years and dramatically reduced inventory levels across the entire supply chain. We are committed to taking aggressive actions during this period of slow demand to make permanent improvements in our business model," Capellas said.

"It is now clear that the economic slowdown is spreading overseas, and we will therefore move more swiftly and go even deeper in our structural cost reduction programs."

Reductions will be primarily from the Access segment, supply chain and administrative functions, both in the US and internationally.

In April Compaq announced that it planned to cut 7000 jobs through layoffs and attrition.

But during a conference call in the US after the announcement, Compaq's chief financial officer, Jeff Clarke, said the attrition rate at the company has been lower than expected. The expected 2500 jobs marked for elimination through attrition will now be cut through layoffs along with an additional 1500 positions to bring the total to 4000 cuts.

Compaq will announce its complete second quarter results at close of market in the US on July 25.

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