NEW YORK – Compaq Computer Corp. on Tuesday lowered its sales and earnings forecasts for the second quarter, as the No. 2 personal computer maker contended with an industry-wide slowdown and fierce price competition.
Revenue for the second quarter will be about $8.4 billion, down 9 percent from the first quarter, primarily due to worsening economic conditions in Europe, Compaq said. The company said it now expected job cuts this year to total 8,500, up from the 7,000 jobs it had earlier planned to cut for the year.
Shares were halted for the news, and traded initially in after-hours at $14, up slightly from the close of $13.76 on the New York Stock Exchange.
``I don't think there is a lot positive to take away from this announcement,'' said David Bailey, an analyst at Gerard Klauer Mattison & Co. ``It indicates that Compaq's revenues continue to deteriorate, that they are undertaking yet another restructuring which, while reducing expenses, could hamper some of their initiatives to refocus the company.''
Compaq, which recently said it would refocus its efforts more closely on its services business, is slated to report its quarterly results on July 25.
The Houston-based company said in April that it expected its second-quarter revenue would be roughly $9 billion, or flat with the first quarter, and that profits would rebound strongly in the second half.
Compaq said it now expected earnings on an operating basis for its second quarter of 4 cents per share. That was down from the 5 cents a share the company had estimated in April, instead of the 17 cents then seen by Wall Street.
``We are committed to taking aggressive actions during this period of slow demand to make permanent improvements in our business model,'' Michael Capellas, chairman and chief executive, said in a statement.
``It is now clear that the economic slowdown is spreading overseas, and we will therefore move more swiftly and go even deeper in our structural cost reduction programs,'' he added.
Earlier this year, Compaq lost its position as the No. 1 personal computer maker to Dell Computer Corp., as Dell slashed prices of computers and dragged the rest of the PC industry into a price war.
Analysts had already lowered the bar for Compaq, and on average expected second-quarter earnings per share of 4 cents, according to Thomson Financial/First Call.
The company also said that it is taking an additional restructuring charge of about $490 million in the second quarter, related to the additional job cuts and its efforts to reduce inventory built up at retailers and distributors.
Compaq has cut 3,500 jobs so far this year.
Prior to issuing its warning, Compaq shares ended down 44 cents, or 3.1 percent, at $13.76 on Tuesday New York Stock Exchange trading. The stock has traded in a range of $34.81 and $13.20 over the past 52 weeks.
Compaq shares have fallen about 9 percent this year, while rival Dell's shares have risen nearly 50 percent, outperforming Compaq by 60 percent.