Compaq Beats Reduced Expectations

HOUSTON (AP) â€” Compaq Computer Corp. reported better than expected revenue growth in the fourth quarter and earnings that beat Wall Street's reduced expectations. <br><br>Houston-based Compaq said

Thursday, January 25th 2001, 12:00 am

By: News On 6

HOUSTON (AP) â€” Compaq Computer Corp. reported better than expected revenue growth in the fourth quarter and earnings that beat Wall Street's reduced expectations.

Houston-based Compaq said Tuesday it earned $515 million, or 30 cents a share, in the final three months of 2000, up from $332 million, or 19 cents a share, in the year-ago period.

The 2000 figure excludes a $1.8 billion charge related to the devaluation of its large stake in CMGI Inc. Including the one-time charge, the company reported a net loss of $672 million, or 39 cents per share.

Analysts surveyed by First Call/Thomson Financial had expected Compaq to earn 36 cents per share before the company's Dec. 12 warning that slow holiday sales would depress profits to between 28 cents and 30 cents per share. The consensus estimate fell to 28 cents a share after the announcement.

Revenues rose to $11.53 billion, up 10 percent from $10.48 billion.

Sluggish domestic personal computer sales depressed an otherwise robust quarter, Compaq chairman and chief executive officer Michael Capellas said.

``The strength of our enterprise business, international growth and solid services profitability offset softness in the North American personal computer market,'' Capellas said.

Several other major computer systems makers â€” including Intel, Gateway and Apple â€” also warned of lower earnings before Christmas. Dell Computer Corp. issued a similar warning Monday in advance of its earnings report next month.

Capellas remains cautious about near-term prospects.

``While market conditions will be difficult in the first half of the year, we will continue to differentiate ourselves by developing innovative products, integrating them into solutions and serving the global market,'' Capellas said.

``For the full year 2001, we are comfortable with analyst estimates of earnings per share growth in the 20 to 25 percent range,'' he added.

For all of last year, Compaq had net income of $569 million, or 33 cents a share, unchanged from 1999, when Compaq earned 34 cents a share.

Compaq backed off of previous estimates of 10 percent revenue growth, lowering expectations to between 6 percent and 8 percent, with most of that coming after a near-stagnant first quarter.

``We see a much stronger second half of the year than first half,'' executive vice president Michael Winkler said. ``But we continue to see a good market in high-end servers, services and storage.''

Richard Chu, an analyst for SG Cowen Securities Inc., said Compaq appears willing to give up market share in the highly competitive PC business as it pursues the more lucrative high-end server market.

``The posture makes sense to focus on profitability on the bottom line than go for the marginal sale,'' Chu said.

Revenue in 2000 totaled $42.38 billion, up 10 percent from $38.53 billion the previous year.