Compaq Computer Corp. Tuesday could not escape the general malaise that has affected the computer industry in the past few months. It warned the Street that fourth quarter revenues and earnings would fall below expectations, due in large part to weakness in U.S. markets.
The computer maker said revenue would be in the neighborhood of $11.2 billion and $11.4 billion, eight to 10 percent below forecasts. Earnings from operations, excluding one-time charges, will be between 28 cents and 30 cents per diluted common share according to the company — about eight cents below the 36 cents per share Wall Street was looking for.
Attempting to put a positive spin on the situation, the company noted that revenue did increase about seven percent over the same quarter in 1999. It added that earnings from operations were 50 percent above Q4 1999.
“We ended the third quarter with positive market momentum in virtually all of our business segments,” said Michael Capellas, chairman and chief executive officer of Compaq. “While we had a good start to the fourth quarter, it is now clear that market confidence has wavered and that we will be affected by the general softness in the U.S. consumer, small and medium business and dot-com markets. Business activity in the rest of the world remains on track.”
Capellas added, “We are taking the actions required to adjust to changing market conditions. Channel inventories are currently at planned levels of four weeks for commercial products and just under seven weeks for consumer products. We will continue to balance growth and profitability as well as tightly manage expenses.”
The company also said that changing conditions in the market have forced it to reassess its strategic investments. Compaq will make downward adjustments in the valuations of some of its holdings, especially incubator CMGI and its related assets. The company said it anticipates a non-operating, non-cash charge in the fourth quarter.
“Overall, our outlook for 2001 remains positive, although we expect the second half of the year to be stronger than the first half,” Capellas said. “Our current 2001 plan calls for 10 percent revenue growth and 25 percent growth in earnings per share over the revised estimates for the fiscal year 2000. Although this is lower than our previous guidance, it still reflects strong year-over-year improvement. I remain very confident in the long-term strength of the information technology market and in Compaq’s ability to be one of the clear leaders.”
The quarter is scheduled to end on Dec. 31 and actual results will be announced Jan. 23, 2001.