Compaq's Earnings Beat Forecast

FRAMINGHAM (04/25/2000) - Compaq Computer Corp. in Houston beat analysts' forecasts for earnings in the first quarter of this year, but revenues were down for both its enterprise and commercial PC divisions.

The computer manufacturer fared best with consumer sales, with $1.8 billion in that division in first-quarter revenue, up 35% from a year ago. That represents nearly 20% of all revenues, which totaled $9.51 billion for the first quarter, a 1% gain over a year ago.

Compaq said overall net income was $325 million for the quarter, up from $281 million for the first quarter of last year. This resulted in earnings of 19 cents per share, up from 16 cents in the quarter last year and above the 16-cents-per-share consensus expected by financial analysts surveyed by First Call/Thompson Financial in Boston.

"Overall, I am pleased with our improved execution in the quarter," said CEO Michael Capellas, who assumed the position last July. Last April, Eckhard Pfeiffer was relieved of the top post, amid successive earnings disappointments and concerns by large customers about the integration of Digital Equipment Corp. into Compaq.

Compaq's Enterprise Solutions and Services Group, which serves the largest customers, saw a 4% decline over a year ago, to $4.7 billion. The enterprise business represented half of the first quarter's revenue.

The commercial desktop computing group, meanwhile, posted a 7% revenue decline, to $2.9 billion, or about 30% of total revenues. Despite the decline, Compaq noted that the figure represents an improvement over the past three quarters.

Compaq attributed the enterprise decline to year 2000 lockdowns, channel inventory reductions and a weak European market. Its latest Alpha server, called Wildfire, will launch next month and Compaq said it already has orders for 120 of the high-end computers. But for the first quarter, Alpha sales declined by an unspecified amount, Compaq said.

Analysts said they were awaiting a briefing on the results before commenting on them.

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