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Compaq lowers guidance, takes $500m charge for Q3

Compaq lowers guidance, takes $500m charge for Q3

Compaq Computer expects third-quarter revenue to be below its former guidance because of the terrorist attacks in September and other related supply chain and logistics events, the company said.

Compaq now expects revenue to be between $US7.4 billion and $7.5 billion for the quarter, which ended September 30, the company said on Monday. Based on preliminary data for the quarter, the company also expects to report a loss, on an operational basis, of between $0.05 and $0.07 per diluted common share, Compaq said in a statement.

In the third quarter of 2000, Compaq reported revenue of $11.2 billion.

The attacks on September 11 slowed market demand and disrupted transportation and logistics, Michael Capellas, Compaq's CEO, said in the statement.

"When it comes to the current quarter, I think the only way that describes it is 'the perfect storm'," Capellas said in a conference call with analysts and the media. Although the attacks in the US had the most visible effect on the company, September also brought a severe typhoon in Taiwan and the announcement that Compaq had agreed to merge with Hewlett-Packard, he said.

The typhoon in Taiwan had a significant effect on shipments for Compaq, especially when coupled with the attacks in the US, which grounded all commercial flights in the US for several days, Capellas said. Nearly 75 per cent of Compaq's supplies are transported by plane, and because of these events, Compaq lost the equivalent of an entire week of business in September, Capellas said.

The third quarter was also tough outside the US, Jeff Clarke, Compaq's chief financial officer, said in the conference call. "In terms of Europe, we saw very aggressive pricing," Clarke said. There was also a very abrupt slowdown in Europe, resulting in "weakness across all major countries in Europe", Clarke said.

Compaq also said it expects a non-cash charge of approximately $US500 million in the third quarter, primarily related to Compaq's investment in CMGI, Compaq said.


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