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Compaq sees slow Q2 sales, lays off 4,000 more

Compaq sees slow Q2 sales, lays off 4,000 more

Compaq on Tuesday said it expects revenue for its fiscal second quarter to be down 9 per cent from the first quarter, and announced plans to lay off an additional 4,000 workers as part of an ongoing restructuring effort aimed at cutting costs.

The company also announced that it expects to report earnings of $US0.04 per share for the second quarter, which ended June 30. That figure would be in line with forecasts from analysts polled by Thomson Financial/ First Call. Compaq plans to announce its second quarter results on July 25.

Compaq expects to generate $US8.4 billion in revenue for the second quarter, the company said in a statement issued after the close of US financial markets. It cited worsening economic conditions in Europe as the reason for the decline from the previous quarter.

The layoffs are part of an ongoing restructuring program announced in March, and bring the total number of planned layoffs this year to 8,500 workers, Compaq said in the statement. The layoffs will occur both in the US and overseas.

The company expects to take an additional restructuring charge of approximately $490 million in the second quarter, primarily related to the elimination of the 4,000 workers, the company said.

Compaq is committed to taking "aggressive actions" during the period of slow demand in order to improve its business model, Chairman and Chief Executive Officer Michael Capellas said in the statement. The economic slowdown is spreading from the US to overseas, and Compaq will "therefore move more swiftly and go even deeper in our structural cost reduction programs," he said.

Compaq originally had said it expected to make about $9 billion in revenue for its second quarter, but lowered this estimate after seeing weakness in Europe, particularly in the UK, Germany and Switzerland, said Jeff Clarke, senior vice president and chief financial officer at Compaq, in a conference call with press and analysts.

"We continue to see very aggressive pricing across all regions, with it being most apparent in North America but catching up in Europe," Clarke said.

Shares of Compaq (CPQ) on the New York Stock Exchange closed down more than 3 per cent during Tuesday's trading, at $13.76.


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