Compaq's Earnings Low; Annouces New Deskpros

On the heels of its biggest partner, Microsoft Corp., announcing better-than-expected earnings, Compaq Computer Corp. announced lower-than-expected earnings of $9.4 billion for the first quarter ended in March, an increase of almost 66 percent over the same period last year. Net income for the period was $281 million, or $0.16 per share.

"Despite our overall corporate strength, our first-quarter results are disappointing and unacceptable," says Benjamin Rosen, acting CEO for Compaq. "We will aggressively pursue the actions necessary to realize our enormous potential, achieve our traditional levels of profitable growth and build long-term shareholder value."

Former CEO Eckhard Pfeiffer resigned under board pressure earlier this week along with CFO Earl Mason. Ironically, it was Rosen, a founder of Compaq, who fired Pfeiffer's predecessor Rod Canion in 1981.

Compaq noted the first quarter performance for the commercial PC business at below internal expectations as a reason for the offset of the company's sales performance. Compaq states there was less-than-anticipated market demand, increased competitive pricing and growth below plans, which all contributed to a revenue shortfall for the entire business. The company says it did not achieve the revenue performance needed in the enterprise space to meet its expected levels of product revenue and gross margin for the quarter.

Later the company announced of three new Pentium-based Deskpro systems equipped with Windows 9.x/NT, the highest of which was the Deskpro EN Series Pentium III 500 MHz with 64 MB RAM, 10 GB hard drive, a network interface card and 15-inch V500 color monitor priced at $2249.

Total gross margin for the quarter was 24.7 percent versus 18 percent in the same period in 1998. Product sales for the quarter did reach $7.8 billion, an increase of $2.2 billion or approximately 40 percent above the reported first quarter in 1998. -- Brian Ploskina

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.

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