Compaq's Profit, Sales Take a Dive

From Reuters

Compaq Computer Corp. posted sharply lower second-quarter profit and sales Wednesday and said sales could continue to slide in the coming months as a downturn in the computer sector spreads around the world.

"It's an understatement to say that we're in the midst of an extremely challenging global market," said Michael Capellas, chairman and chief executive.

The No. 2 maker of personal computers also forecast that operating earnings per share will about double in the third quarter from the current period but could lag Wall Street's consensus target.

Second-quarter pro forma net earnings, which exclude one-time charges, fell to $67 million, or 4 cents a diluted share, from 21 cents a share in the year-ago period.

Profit also was down from the previous quarter's $200 million, or 12 cents a share.

Sales fell to $8.45 billion in the quarter ended June 30 from $10.14 billion in the same quarter a year earlier.

"Europe and Asia Pacific were the engines of what growth and stability there was," said Wit SoundView analyst Mark Specker. "To see them slow down is a bit frightening."

Before the results were announced Wednesday, shares of Compaq closed up 27 cents at $14.12 on the New York Stock Exchange.

Analysts on average had expected second-quarter operating earnings of 17 cents a share earlier in the year.

Third-quarter sales will be $8 billion to $8.4 billion, bringing earnings of 7 cents to 9 cents a share, Compaq forecast.

Wall Street analysts polled by First Call/Thomson Financial had a consensus forecast of 9 cents a share for the third quarter.

Compaq had announced preliminary results July 10, blaming weakness in Europe and a PC price war, and promising to cut 8,500 jobs this year to shore up profit.

Including a $493-million restructuring charge, Compaq posted a net loss of $279 million, or 17 cents per diluted share, in the second quarter, compared with a profit of $388 million, or 22 cents per diluted share, a year earlier, the company said.

Compaq said its services division--which the company sees as its future--was gaining ground, with revenue up 7% year on year in the quarter, representing nearly a quarter of the company's sales, even as enterprise computing hardware revenue dropped 21%.

Other earnings, excluding one-time gains or charges unless noted, include:

* Agere Systems Inc. reported an operating loss of $115 million, or 7 cents a share, for its fiscal third quarter as revenue fell 22% to $927 million. Analysts were expecting an 8-cent loss. Including one-time charges and other items, Agere had a loss of $1.11 billion, or 68 cents a share, compared with the year-earlier loss of $365 million, or 35 cents.

* BroadVision Inc. posted a second-quarter loss of $53.1 million, or 19 cents a share, in line with the company's warning this month, contrasted with net income of $10.6 million, or 4 cents, a year ago. Revenue dropped 40% to $57.4 million as software license revenue fell 63% to $21 million. Analysts were expecting a loss of 11 cents on sales of $84.8 million before the company's warning July 3.

* Corning Inc., the biggest maker of fiber and cable used in optical networks, reported a second-quarter operating profit of $80 million, or 9 cents a share, down 46% from a year ago. Including charges of $4.76 billion to write down the value of acquisitions, Corning had a loss of $4.76 billion, or $5.13 a share. Sales rose 5.2% to $1.87 billion, exceeding analyst expectations of $1.76 billion.

* Inc. said its second-quarter loss narrowed to $2.88 million, or 6 cents a share, from $20.3 million, or 42 cents, a year ago, as sales nearly tripled to $62.5 million from $21 million. The Internet search service had forecast a much steeper loss of $5 million in April. The company also said it expects to report net income of $1 million, or 2 cents a share, in the third quarter.

* Western Digital Corp., a maker of computer disk drives, said its fiscal fourth-quarter loss widened to $61.2 million, or 34 cents a share, from $26.3 million, or 19 cents, a year earlier, in part because of an investment loss. Sales fell 3.8% to $456 million.

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