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7/28/1999
04:45 PM
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Compaq Posts 2Q Loss, Warns About 3Q

Compaq's new CEO, Michael Capellas, presented shareholders with dismal second-quarter earnings today and warned that improvements won't be seen in the next quarter, when Compaq says it will face a $700 million to $900 million restructuring charge as it closes plants and lays off up to 8,000 employees.

The troubled PC maker posted a net loss for the period of $184 million, compared with a net loss of $3.6 million for the second quarter last year, which included charges for the acquisition of Digital Equipment. Revenue for the period was $9.4 billion, compared with $5.8 billion for the quarter in 1998.

Capellas attempted to assuage investors by promising that his management team was already implementing a realignment, focusing efforts on simplifying Compaq's distribution strategy, creating more innovative products, and reducing costs. He attributed the company's poor performance to PC price drops and Compaq's noncompetitive cost structure, which inhibits revenue growth.

Compaq's services-related revenue increased to $1.6 billion from $460 million quarter over quarter, while costs associated with those services increased to $1.2 billion from $316 million. Enterprise products, including servers and storage equipment, increased 11% year over year, the company said.

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