Compaq Misses Lowered Third-Quarter Forecasts

HOUSTON —  Compaq Computer Corp., in its first quarterly earnings report since last month’s announcement that it was being bought by Hewlett-Packard Co., posted a hefty loss in the third quarter, missing analysts’ already lowered estimates.

The company also predicted a tough fourth quarter.

Houston-based Compaq posted a net loss of $499 million, or 29 cents per share, compared with profit of $557 million, or 31 cents per share, in the third quarter of 2000.

Excluding $379 million in losses on its investment in Internet incubator CMGI Inc., Compaq lost $120 million, or 7 cents per share, on the low end of a warning it issued Oct. 1, when the company said it expected a third-quarter per-share loss between 5 cents and 7 cents.

The consensus among analysts surveyed by Thomson Financial/First Call was a 6-cent loss for the quarter that ended Sept. 30.

Revenue fell 33% to $7.48 billion, below analysts’ expectations of $7.53 billion.

Compaq has blamed fallout from the Sept. 11 terrorist attacks and a Pacific typhoon for disrupting business, which already was weakening in a slowing global economy.

“The third quarter was one of the most challenging ever for Compaq and for our industry,” said Michael Capellas, chairman and chief executive, who said Compaq’s services and business technology sectors “performed well given overall market conditions.”

Compaq’s personal computing segment, caught in a worldwide price war, lost $248 million for the quarter. The $3.26 billion in PC revenue was down 42% from $5.6billion in the year-ago quarter, when the business was profitable.

Chief Financial Officer Jeff Clarke said Compaq is working to improve its PC model, including increasing direct commercial PC sales, reducing operating costs and improving product lines.

“However, given current market volumes and pricing, it is unlikely that we can return the [PC] segment to profitability over the next several quarters,” Clarke said during a conference call Tuesday. “Nonetheless, we believe we hit the bottom in the third quarter and expect measurable progress in the fourth quarter and beyond.”

Analyst Kurt Schlegel, of the tech research firm META Group, said Compaq’s strategy of packaging hardware with services is a must for computer makers in a climate of plunging PC prices.

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The earnings statement was released after markets closed. Compaq shares fell 25 cents to $9.40 in trading Tuesday on the New York Stock Exchange.