Compaq to report surprise profit
Published: 07 Jan 2002 17:24 GMT
Compaq Computer handed the tech sector some unexpected good news on Monday, saying it would turn a profit for its fourth quarter.
Compaq said on Monday that it would report a profit for the quarter, with sales coming in at more than $8bn. The company had previously said it expected to report a 3 cent per-share loss and revenue between $7.6bn and $7.8bn.
"These results represent strong execution and Compaq's solid momentum in the marketplace," said chief executive Michael D. Capellas in a statement.
Compaq's outlook may indicate that the company can stay focused despite the turmoil surrounding its proposed merger with Hewlett-Packard. Compaq's merger with Hewlett-Packard is being fought by members of the Hewlett and Packard families, and there were concerns that all the upheaval would disrupt business.
For its part, Compaq has worked hard to show it can function as a standalone company even if the HP deal unravels.
Compaq has managed to sign a number of big deals amid all the turmoil, including contracts with Ericsson, American Express, General Motors and General Electric, among others.
Compaq's announcement may also help confirm Wall Street's view that the PC sector is rebounding. After what was basically a dismal year for PC sales, analysts have been becoming a bit more optimistic.
Salomon Smith Barney analyst Richard Gardner said on Monday that US retail PC sales rose 30 percent from the third quarter to the fourth quarter, better than the typical 15 percent to 20 percent jump. Part of that was due to the fact that September's sales were abnormally low, however, and shipments during the second half of the year were only about 7 percent higher than the first half, he said --a bout half the normal rate.
Still, Gardner said fourth-quarter demand "turned out better than expected."
"We believe Compaq not only had a good (fourth quarter) but that changes made in 2001 will pay dividends in 2002 including lower expense structure, lower inventories and more direct sales," wrote Lehman Brothers analyst Dan Niles. He added that fourth- quarter sales would probably be better than expected, because of strong sales in Europe, Compaq's commercial business and better consumer demand.
Niles upgraded Compaq from a "buy" to a "strong buy" Monday.
Compaq will formally announce results for the quarter and for the fiscal year on 16 January.
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