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Compaq Earnings Fall on Weak Tech Spending

By Reuters
Published | Updated

NEW YORK – No. 2 personal computer maker Compaq Computer Corp. on Wednesday said its fourth-quarter earnings, excluding items, fell sharply as technology spending by corporations declined.

Compaq -- which plans to merge with competitor Hewlett-Packard Co. -- said it earned 6 cents per share in the fourth quarter, excluding a $36 million charge for merger-related expenses. That is down from 30 cents per share in the year-ago period, which excluded a $1.8 billion write-down on an equity investment.

Including the charge for this quarter, the company posted net earnings per share of 5 cents.

The company said revenue fell to $8.5 billion, down 26 percent from the $11.5 billion in revenues it posted a year earlier.

On Jan. 7, Compaq told investors it expected to post a profit instead of its previously expected loss on revenue of more than $8 billion, compared with the $7.6 to $7.8 billion it had projected.

Looking forward, Compaq said that it expects earnings of 1 cent per share on revenue of $7.6 billion. Analysts had expected the company to break even in the first quarter on revenue of $7.325 billion, according to research firm Thomson Financial/First Call.

"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," Chief Executive Michael Capellas said in a statement.

Compaq's profit comes after a quarter in which the company lost 6 cents per share and on the back of several quarters in which the company consistently warned of lower earnings.

In 2001, the company struggled with weak demand for personal computers and an aggressive price war started by competitor Dell Computer Corp., which in mid-2001 stole Compaq's spot as the No. 1 PC company.

Since then, Compaq's merger with Hewlett-Packard has run into roadblocks since it was first announced on Sept. 4 as 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, but no date has been set for a shareholder vote yet.

In Wednesday trading on the New York Stock Exchange, Compaq shares ended down 23 cents, or 2 percent, at $11.17. The shares have traded in a 52-week range of $24.97 and $7.28.