Compaq Reports 83% Gain in Profit as Server Sales Surge
Compaq Computer Corp., the leading personal computer maker, said profit jumped 83% in the fourth-quarter as sales of powerful servers helped make up for slower PC purchases by consumers and small businesses.
Chief Executive Michael Capellas also said the company is comfortable with analyst estimates of earnings growth in the 20% to 25% range for 2001.
Compaq’s shares jumped as high as $24 on the report in after-hours trading, after closing at $20.05, up 23 cents, on the New York Stock Exchange.
Profit from operations rose to $515 million, or 30 cents a share, from $282 million, or 16 cents, a year earlier, the Houston-based company said. Sales grew 10% to $11.5 billion.
The results beat an average earnings estimate of 28 cents from analysts polled by First Call/Thomson Financial. Some estimates on the Internet were as high as 30 cents.
Compaq cut its earnings forecast in October because of slowing demand in Europe, then lowered its forecast again last month as it became clear that PC sales weren’t getting the traditional holiday boost.
For the first quarter, Compaq expects sales to be about $9.6 billion, little changed from the $9.5 billion reported in the year-earlier quarter, Chief Financial Officer Jesse Greene told analysts on a conference call.
Capellas blamed the slower sales growth on heavy discounting, particularly in the consumer PC market, as distributors clear out excess inventory.
Compaq’s inventory has remained steady at 3.9 weeks for commercial PCs and 4.3 weeks for consumer models, Executive Vice President Peter Blackmore said.
Compaq intends to focus on selling more profitable servers rather than fight for PC market share with rivals such as Dell Computer Corp., Blackmore said. As a result, Compaq expects to earn 21 cents in the first quarter, compared with 16 cents a year earlier. Analysts estimate the company will have profit of 20 cents, according to First Call.
Compaq now gets less than half of its sales from desktop personal computers. Sales of servers, the big machines that run networks and Web sites, surged 20% to $4.11 billion, while the product line’s profit rose 64% to $722 million.
That countered slower growth in consumer PC sales, which rose 3.5% to $2.04 billion. The unit reported an operating loss of $6 million, compared with a profit of $69 million a year earlier.
Compaq reported an operating profit of $113 million for commercial PCs, compared with a loss of $79 million a year ago, as sales rose 11% to $3.47 billion.
Revenue from computer services fell 4.8% to $1.81 billion.
At a Glance
Other technology sector earnings, excluding one-time gains or charges unless noted, include:
* Compuware Corp. said its fiscal third-quarter earnings dropped 65% to $46.7 million, or 13 cents a share, in line with forecasts, as the company worked to make itself less dependent on mainframe software revenue. Revenue fell 11% to $495.4 million.
* EMC Corp., the No. 1 data storage company, said its fourth-quarter earnings rose 49% to $563 million, or 25 cents a share, 2 cents better than analysts expected, as revenue grew 40% to $2.62 billion. Revenue from networked information systems surged more than 250% to $770 million, and software sales increased 72% to $483 million.
* Interwoven Inc., whose software allows companies to manage what appears on their Web pages, reported earnings of $2 million, or 2 cents a share, beating analyst expectations of a penny, as the company added 147 new customers. Revenue soared to $54.6 million from $7.5 million. The profit compares with a year-ago loss of $3.5 million, or 5 cents a share. The company also raised its outlook for the first quarter and full year 2001.
* Lam Research Corp., one of the largest makers of semiconductor manufacturing equipment, reported fiscal second-quarter operating profit of $79.1 million, or 58 cents a share, handily beating forecasts of 53 cents, as sales jumped 71% to $494.3 million. The company had net income of $36.7 million, or 28 cents, in the year-ago period.
* LSI Logic Corp. said fourth-quarter operating earnings rose 52% to $116 million, or 34 cents a share, in line with reduced forecasts, as an inventory buildup among its customers hurt sales. Revenue rose 28% to $751 million. The chip maker also warned that it now expects first-quarter earnings of 21 cents, well below expectations of 34 cents, and said sales will be down about 12% from the fourth quarter.
* Nextel Partners Inc., a wireless-telephone carrier serving smaller U.S. markets, said its fourth-quarter loss widened to $75.3 million, or 32 cents a share, from $53.3 million, or 18 cents, a year ago, as it spent more to provide and sell the service. The results matched analyst expectations. Sales surged more than fourfold to $53.4 million from $12.1 million as the company began serving new markets in the South. Nextel Partners is affiliated with Nextel Communications Inc.
* Oak Technology Inc., a provider of optical storage equipment, posted fiscal second-quarter earnings of $6.3 million, or 10 cents a share, versus a loss of 34 cents a year ago, as expected. But the company warned that revenue could fall by as much as 40% in the current quarter. Revenue rose 19% to $60.6 million.
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Earnings Reports
A sampling of companies reporting quarterly earnings Tuesday and expected to report today, ranked by year-over-year earnings-per-share (EPS) growth, compiled by First Call/Thomson Financial.
Reporting Tuesday
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Analysts’ % above/ Year- Ticker est. Actual below ago Company symbol EPS EPS estimate qtr. Siebel Systems SEBL $0.15 $0.20 +33% $0.09 Public Srv Ent PEG 0.93 0.98 +5 0.61 NCR NCR 1.02 1.05 +3 0.75 Tellabs TLAB 0.56 0.56 0 0.41 Robert Half RHI 0.26 0.26 0 0.21 Johnson & Johnson JNJ 0.64 0.65 +2 0.56 McKesson HBOC MCK 0.25 0.24 -4 0.21 Merck MRK 0.75 0.75 0 0.66 Kimberly-Clark KMB 0.87 0.87 0 0.79 Westamerica WABC 0.56 0.56 0 0.51 Praxair PX 0.76 0.76 0 0.70 Wrigley WWY 0.70 0.70 0 0.64 Cooper Ind CBE 0.96 0.95 -1 0.89 Merrill Lynch MER 0.88 0.93 +6 0.91 American Elec Power AEP 0.42 0.49 +17 0.55 Compuware CPWR 0.13 0.13 0 0.35
Year- over-year Company % change Siebel Systems +122% Public Srv Ent +61 NCR +40 Tellabs +37 Robert Half +24 Johnson & Johnson +16 McKesson HBOC +14 Merck +14 Kimberly-Clark +10 Westamerica +10 Praxair +9 Wrigley +9 Cooper Ind +7 Merrill Lynch +2 American Elec Power -11 Compuware -63
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Expected Today
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Ticker Analysts’ Year-ago Predicted Company symbol estimated EPS quarter pct. chg. Qwest Q $0.14 $0.04 +250% Texaco TX 1.51 0.67 +125 Occidental Petro OXY 1.05 0.52 +102 Chevron CHV 2.21 1.24 +78 Exxon Mobil XOM 1.31 0.77 +70 Hilton Hotels HLT 0.17 0.11 +55 General Dynamics GD 1.07 0.98 +9 Northrop Grumman NOC 1.97 1.96 +1 McDonald’s MCD 0.35 0.35 0 Amgen AMGN 0.25 0.26 -4 T. Rowe Price TROW 0.50 0.55 -9 Norfolk Southern NSC 0.07 0.08 -13 Whirlpool WHR 0.99 1.51 -34 International Paper IP 0.30 0.55 -45 TRW TRW 0.50 1.33 -62 Lucent LU -0.27 0.33 NM
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Notes: NM = not meaningful. A loss in any period makes percentage change not calculable.
Year-over-year growth and percentage changes are based on earnings-per-share figures and may differ from percentage changes based on total profit.
For more information on First Call, check www.firstcall.com.
