Compaq NZ goes against world trend

Despite more job cuts and expectations of falling revenue by Compaq worldwide, Compaq New Zealand is bucking the trend and has increased revenue for its second quarter.

          Despite more job cuts and expectations of falling revenue by Compaq worldwide, Compaq New Zealand is bucking the trend and has increased revenue for its second quarter.

          It's business as usual for the local operation, says Compaq New Zealand managing director Russell Hewitt. He says plans by Compaq Corporate to lay off an additional 4000 workers as part of an ongoing restructuring effort aimed at cutting costs will have little or no impact here. The layoffs are part of an ongoing restructuring program announced in March, and bring the total number of planned layoffs this year to 8500 workers. They will occur both in the US and overseas.

          But Hewitt says the attrition rate at Compaq New Zealand remains the same, approximately less than 10 people leave and join the company in any given month.

          He says Compaq New Zealand has just hired 10 new developers for its application development centre in Christchurch and is looking at taking additional space.

          Compaq US says it expects revenue for its fiscal second quarter to be down 9% from the first quarter. It cites worsening economic conditions in Europe as the reason for the decline from the previous quarter.

          However the New Zealand operation has had its "largest" second quarter since 1998, says Hewitt. Compaq New Zealand has had double figure percentage growth in profit and revenue from Q1 2001 to Q2 2001, and also year-on-year from Q2 2000 to Q2 2001.

          Hewitt puts the success down to the fact that the local operation is relatively small but operates in so many areas – consumer, SME, commercial, corporate and government - and it has a strong reseller network.

          Compaq Australia refused to comment on the effects of the job cuts there, saying they were in a quiet period before the results are announced on July 25.

          This is the second time that Compaq has increased its cutback plans since initially saying in March that 5000 jobs were being targeted. A month later, when it reported a 74% drop in first-quarter net income, the company raised the job reduction figure to 7000, with 4500 due to come through layoffs and the remainder via attrition.

          When all the cuts are made, Compaq will have reduced its workforce by a total of about 15%. The company says the new layoffs are primarily taking place in its Access business unit, a combination of its corporate and consumer PC operations that was set up earlier this year, as well as in its supply chain and administrative departments.

          About 3500 of the 11,000 targeted jobs have actually been eliminated thus far, "and the savings are already apparent," says Jeff Clarke, Compaq's chief financial officer. "However, further actions are required, and we will address these with similar urgency."

          Compaq expects to save about $US900 million in annual costs through the workforce reduction program. But the company said it will take a $US490 million charge against its second-quarter earnings in order to pay for the new layoffs and "related asset impairments" stemming mainly from last month's decision to phase out development of the Alpha microprocessor. The second-quarter results are scheduled to be announced July 25.

          Like other technology vendors, Compaq is struggling to cope with IT spending cutbacks and delays by corporate users reacting to the sluggish economy. Already this week, other vendors that have announced layoffs or issued warnings about their financial results include NCR, Silicon Graphics and Alcatel.

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