Small Quarterly Victory For Compaq



Compaq beat industry expectations for its first quarter, but only by the skin of its teeth. Compaq reported first-quarter net income of $325 million, or 19 cents a share, compared with $281 million, or 16 cents a share, a year ago. Analysts had expected per-share income of about 16 cents.

Given that there had been concern that the company wouldn't meet market expectations, the essentially flat performance was rewarded with a $4 jump in Compaq shares, to $30.25. (Company execs made the unorthodox decision to discuss the quarter just before the markets closed Tuesday.)

Compaq posted revenue of $9.51 billion for the quarter, ended March 31, up 1% from the $9.42 billion recorded last year. Michael Capellas, Compaq's president and CEO, says a slowdown in PC sales due to Y2K fears, and the company's slow growth in Europe had an impact on its enterprise business, which represented 50% of first-quarter revenue.

Looking ahead, Compaq CFO Jesse Greene Jr., says the computer maker will incur additional costs from the launch of Wildfire, a new Alpha server, to be launched in May, and from increased investment in advertising and communications.

Market analyst Ashok Kumar of U.S. Bancorp Piper Jaffray says, Compaq is providing its shareholders with some reassurance "that the worst is over," and it needs to reduce its cost structure and show signs of top-line growth.

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