Compaq Australia Turns Profit Despite Upheavals

SYDNEY (01/27/2000) - In a tumultuous year that included being dumped by retailer Harvey Norman and the launch of its controversial retail strategy, Compaq Computer Corp. has posted positive local financial results.

Compaq Australia posted a 14 percent revenue increase and a 25 percent profit revenue for the year ended Dec. 31, 1999, compared with the same period last year. Globally, Compaq announced net income of US$569 million for 1999 compared with a net loss of $2.7 billion in 1998. The local breakdowns were not available.

"We had a very good year," said Ian Penman, Compaq Australia's managing director. "We came home with a wet sail in the last few weeks of the year and had a very good December. We managed to keep things together without them (Harvey Norman).

"Our existing retail stores took up the opportunity with both hands and generally increased their revenues in the last five to six months," he said.

In the final months of last year, Compaq opened eight retail outlets which comprise a "very small percentage of my business," according to Penman.

"Each store is now turning over more than A$1 million (US$652,134) per month," he said. However, the total turnover for those stores in 1999 was less than A$30 million.

Penman said Compaq had made a "considerable investment" in its reorganization in 1997 and 1998 that saw the company increase its focus on individual customer segments. Furthermore, the company chose to abstain from the "vicious discounting" that occurred in many customer deals, Penman said.

"We chose to walk away from some bids because we weren't able to make any money doing business that way," Penman said. "I'd rather bid for business where we make a reasonable margin. In some cases that means we walk away from the business."

Recent figures from research company International Data Corp. (IDC) still peg Compaq as the number one PC vendor, with Dell Computer Corp. cementing its number two position with a 53 percent growth in its PC business.

"Compaq is still the number one PC supplier worldwide," Penman said. "We're fairly aggressive and highly competitive in terms of our technology and methods of distribution.

"Dell's growth was on a much smaller customer base. It grew faster than us, but we maintained a healthy lead. I feel confident about retaining the number one (PC) position," he said.

Compaq's enterprise division posted a 60 percent year-on-year profit growth, while the consumer division grew 58 percent compared with last year. The company's professional services organization grew 30 percent locally, compared with 14 percent globally.

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