Compaq hits lowered Q2 financial targets

Compaq Computer Corp. met lowered earnings expectations for its second quarter, which ended June 30, but a warning that the market for its systems remains volatile will probably lead analysts to further drop their expectations for the struggling hardware vendor, which earlier this month announced plans to lay off 4,000 more workers.

Compaq Wednesday reported net income from operations of US$67 million or $0.04 cents per share, down from net income of $388 million or $0.22 per share one year earlier. The earnings met the consensus forecast of 21 analysts polled by Thomson Financial/First Call. That consensus, however, was lowered from higher earlier forecasts after Compaq issued an earnings warnings earlier this month.

Revenue for the second quarter totaled $8.5 billion for the quarter compared to $10.1 billion in the year-ago quarter.

The company's operational results for the second quarter of this fiscal year do not include a $493 million restructuring charge, mostly related to shedding the 4,000 employees. With those charges included, Compaq reported a net loss of $279 million or a loss of $0.17 per diluted share.

Compaq also announced it expects revenue from the current quarter to be in the range of $8 billion and $8.4 billion and earnings per share of $0.07 to $0.09.

Up to today, the range of analyst opinions had the Houston-based Compaq reporting earnings of between $0.04 and $0.15 per share for the current quarter and "those (in the high range) are all probably going to come down tomorrow," said Chuck Hill, Thomson Financial/First Call director of research, soon after Compaq released its second-quarter results.

How that will translate when it comes to share price remains to be seen, but Compaq put an officially happy spin on the news, with Chairman and Chief Executive Officer (CEO) Michael Capellas [cq] saying in a written statement that he is "pleased with the company's solid execution in this challenging environment."

Capellas also noted, however, that although the U.S. market, with the exception of consumer retail sales, has stabilized, it has weakened in Europe and other regions.

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