Relief despite Compaq earnings fall

By REUTERS
Updated:

 

PERSONAL computer maker Compaq has reported a sharp fall in fourth-quarter earnings that still exceeded expectations after an end-of-year sales boost.

The company, which plans to merge with competitor Hewlett-Packard, said after markets closed that it earned 6 cents per share in the fourth quarter, before a $36m charge for merger-related expenses. That is down from 30 cents a share in the year-ago period, which excluded a $1.8bn write-down on an equity investment.

Compaq said it expects its first-quarter earnings to come in above forecasts and said it sees a recovery ahead.

'While we did see some strengthening of the IT market in the fourth quarter, first-half growth will be moderate and pent-up demand should drive a stronger recovery in the second half of the year,' said chief executive Michael Capellas.

The company unveiled net earnings of $92m, or 5 cents per share, compared with a net loss of $672m, or 39 cents per share, a year ago. It said revenue fell to $8.5bn compared to $11.5bn.

In 2001, the company struggled with weak demand for personal computers and a price war started by competitor Dell, which in mid-2001 stole Compaq's spot as the number one PC company.

Capellas said on Wednesday night he expects to bring the personal computer business, which had been in the red since the company dropped prices to compete with Dell, back to profitability in the second half of 2002.

In addition to the PC price war, Compaq's merger with Hewlett-Packard has run into roadblocks since it was first announced on in September. Members of the Hewlett and Packard families said they planned to vote against the merger.

Both companies say they intend to go ahead with the plan, and Capellas said last night he expects a vote in March.

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