Compaq Computer's growing pains as it tries to evolve from a PC manufacturer to a broader systems provider continue to plague the company, which yesterday reported a minuscule 1 per cent increase in revenue in the first fiscal quarter.
Compaq posted $US9.51 billion in revenue in the company's first fiscal quarter, ended March 31, compared with revenue of $9.41 billion in the same quarter of last year.
Compaq blamed the tiny revenue increase on a spending slowdown caused by Y2K, weakness in Europe and the company's measures to shrink its channel inventory. Adjusted for currency fluctuations - a concept called "constant currency" in the release - the revenue increase would have been 4 per cent, Compaq said.
Net income, including an after-tax gain of $44 million from investments, was $325 million, or 19 cents per share, compared with $281 million, or 16 cents per share, in the same quarter last year. Excluding the after-tax gain, Compaq's earnings were 16 cents per share, which was the consensus from 29 analysts polled by First Call/Thomson Financial.
Revenue dropped 12 per cent in the Europe/Middle East/Africa (EMEA) region and grew 39 per cent in Latin America, 21 per cent in Japan, 9 per cent in Greater China and 4 per cent in North America.
Compaq's Enterprise Solutions and Services Group saw its revenue fall 4 per cent to $4.7 billion. This unit accounted for 50 per cent of the quarter's revenue.
The Commercial Personal Computing Group had revenue of $2.9 billion, a 7 per cent drop, and an operating loss of $19 million, compared with a gain of $24 million in the first quarter of last year.
Meanwhile, the Consumer Group's revenue reached $1.8 billion, a 35 per cent hike, and operating income of $82 million, which represents flat growth compared with last year's first quarter.
"We do not underestimate the challenges that remain, but our progress is evident ..." said Michael Capellas, the company's president and chief executive officer.