Compaq reports profitable quarter

Compaq has reported a profit of $140 million, up 23 per cent from $115 million a year ago. That included $868 million in charges related to a corporate restructuring and a $1.2 billion profit on the sale of its AltaVista Internet portal. Three months ago, Compaq recorded a $184 million in losses last quarter.

Sales were up five per cent from a year ago to $9.21 billion. But, the revenues were down two per cent from $9.4 billion in the second quarter. Chief executive Michael Capellas said he was disappointed in the sales results revenues but encouraged by a drop in operating costs from the second quarter to $1.97 billion from $2.2 billion. "While our revenue numbers were down sequentially, we achieved our earnings per share target, gross margin was up and operating expenses were down,'' Capellas said.

Analyst Ashok Kumar with U.S. Bancorp said he saw little upside in the earnings report. "I think the earnings are clearly a disappointment. The earnings are inflated by accounting. The key issues going forward are the company that has completely lost traction in the commercial desktop line, a company that does not have a strategy for its service division, and because of the deep budget cuts, Europe is in complete disarray. The bottom line is there's no catalyst that indicates any imminent turnaround.''

Capellas discounted recent criticism about Compaq failing to fallow the business model that has propelled Dell Computer into first place in the U.S. PC market. Changes in the personal computer business are not just about sales and distribution models. Product differentiation remains a major factor. "We intend to drive a new generation of products, from desktops to palmtops.''