Surge in Compaq Profit Still Disappoints; Stock Falls 12%

Compaq Computer Corp.’s stock fell 12% Wednesday after the leading personal computer maker reported sharply higher fourth-quarter results that were nevertheless below Wall Street expectations. The company also warned of flat first-quarter earnings.

Compaq shares closed down $5 at $37.375 in New York Stock Exchange trading, with volume reaching 19.7 million shares.

Analysts said the selloff reflected fears of an industry slowdown in PC sales--coming after a warning by IBM on Monday--and earnings that disappointed analysts. But they said the reaction was overblown.

The fall comes after a stellar year for the Houston-based computer maker, which grew so fast it is now the world’s biggest seller of PCs.

Compaq said net income for the fourth quarter surged to $243 million from $151 million in the year-earlier period, translating to per-share earnings of 90 cents, compared to 58 cents.

Quarterly revenue climbed to $3.25 billion from $2.2 billion.

For the year, net income nearly doubled to $867 million from $462 million, as revenue, for the first time, topped $10 billion. It was $10.87 billion, up from $7.19 billion.

While Compaq said it expects strong sales growth to continue, it said surpassing last year’s strong results will be difficult. It forecast flat earnings for the first quarter, largely because of product transition.

The warning sent the company’s stock down as much as $7.875 to a low of $34.50 during a day of frantic trading.

“This year, Compaq confronts the challenges of significant product transitions in the first quarter and has adopted a conservative inventory stance for that period,” said Eckhard Pfeiffer, Compaq president and chief executive.