Compaq Reports Record Third Quarter

Compaq appears to be more than a one-quarter wonder. The PC, server, and storage system maker followed up a strong second quarter with an even more impressive third quarter that saw the company hit a new high for 90-day revenue.

For the quarter ended Sept. 30 and excluding investment gains, the company reported net income of $525 million, or 30 cents per share, compared with net income of $140 million, or 8 cents per share, in the same period a year ago. The consensus per-share earnings estimate among analysts surveyed by First Call was 29 cents.

The company's third-quarter revenue was $11.2 billion, an increase of 22% over last year. Compaq officials attributed the robust financial performance to a revitalized product mix and an enhanced direct-sales capability. The company expects earnings growth in excess of 40% in 2001. Analysts predict sales for Compaq's edgy new iPaq PC will hit $1 billion this year.

The company's strongest performing segment was its Intel-based server group, which posted a 41% year-over-year revenue gain to $1.6 billion. Technology Business Research analyst Lindy Lesperance says Compaq's strong presence in large enterprise environments is behind those numbers. "They still rule the data center," she says. Unix server revenue was up 5%.

Meanwhile, the turnaround of the company's commercial PC business continues. The group posted a 28% gain in revenue to $3.5 billion and an operating profit of $133 million. The unit lost $169 million in the same period last year.