Compaq results "disappointing, unacceptable"

Compaq Computer's much awaited results for the first quarter ended March 31, 1999 have been called 'disappointing and unacceptable' by Compaq's Chairman and acting CEO, Ben Rosen. With poor performance in both its PC and high-end systems business, Compaq turned in $US9.4 billion in sales for the quarter and net income of $281 million, or 16 cents per share.

Compaq Computer's much awaited results for the first quarter ended March 31, 1999 have been called "disappointing and unacceptable" by Compaq's Chairman and acting Chief Executive Officer, Ben Rosen.

With poor performance in both its PC and high-end systems business, Compaq turned in US$9.4 billion in sales for the quarter and net income of $281 million, or 16 cents per share, the company said yesterday in a statement.

The poor results were not a surprise. Compaq issued warning about its earnings on April 10, saying its first quarter results would be lower than expected. Placing the responsibility for poor earnings squarely on the shoulders of its management, Compaq ousted its chief executive officer, Eckhard Pfeiffer, and its chief financial officer, Earl Mason on Sunday.

Compaq blamed its poor performance in its PC business on less-than-anticipated market demand, increased competitive pricing and growth that fell below plan. Average PC prices have dropped in the past year from about $2,000 to $1,000, according to Giga Information Group analysts.

Adding to Compaq's woes, the company did not sell as many high-end systems for large corporations as it needed to meet its expected revenue and margins for the quarter, the company said.

Bright spots were its services business -- where Compaq met its expectations and turned in $1.6 billion in revenues -- and its storage business, which grew sequentially from fourth quarter to the first quarter. Compaq's Internet business thrived during the quarter as well, Compaq said.

Compaq has no immediate plans to alter its strategy of being a full-services system provider for large corporations and a mass-PC seller at the same time, the company has said over the past few days, and again in its statement today. Calling its strategy "fundamentally sound", Rosen said the company will pursue the actions necessary to achieve profitable growth and long-term shareholder value.

Compaq, in Houston, Texas, can be reached on the World Wide Web at http://www.compaq.com/.

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