Compaq beats Q3 earnings, revenue forecasts

Compaq Computer beat financial analysts' forecasts for the third quarter, but offered a mixed outlook for the remainder of the year due to concerns about currency in Europe.

Compaq on Tuesday said it brought in third quarter net income of $US550 million or 31 cents per diluted share, up 23 cents a share from a year ago. The Texas-based computer maker beat the consensus earnings projection of 23 analysts of 29 cents per share, according to First Call/Thomson Financial.

Operating profit for the quarter was $789 million, an increase of $669 million from the same time last year. Meanwhile, revenue rose to $11.2 billion for the quarter that ended September 30, a 22 per cent increase from the same period last year. Again, Compaq beat analysts' expectations of $10.75 billion for the quarter, First Call/Thomson Financial said.

Compaq posted its highest revenue mark for a quarter, while increasing gross margins and reducing expenses, Michael Capellas, Compaq's chairman and chief executive officer, said in a statement. He said he expects 18 per cent revenue growth for the fourth quarter and earnings growth in 2001 that exceeds 40 per cent, which is consistent with consensus estimates, he said.

"This is a record quarter for Compaq, not just for the third quarter, but any quarter," Capellas said during a teleconference. "Our progress was reflected in nearly every part of our business."

That said, Compaq has lowered its earnings estimate for the fourth quarter to 37 cents a share, Compaq's chief financial officer Jesse Greene said during the teleconference. This is because nearly one-third of the company's revenue base comes from Europe, where the Euro has been weak.

Analysts polled by First Call/Thomson Financial had expected Compaq to post earnings of 41 cents a share for the fourth quarter.

Revenue growth was seen in several parts of the world: North America, 27 per cent; Europe, Middle East and Africa, 8 per cent (21 per cent when adjusted for currency); Asia-Pacific, 41 per cent; Japan, 52 per cent; Latin America, 28 per cent and Greater China, 21 per cent.

By product area, Compaq's enterprise computing unit, which includes high-end servers, PC servers and storage, took in $3.79 billion for the quarter. This was up 19 per cent from the year before. Operating income in this sector grew to $597 million from $302 million the same time last year.

Compaq saw storage revenue grow to $1.4 billion, up 9 per cent from the year before. Much of that growth came from enterprise storage growth, the company said. The company shipped 19,000 terabytes of storage for the quarter, a 60 per cent increase over the same time last year.

Compaq's commercial PC group posted revenues of $3.47 billion, up from $2.72 billion the same time last year. The consumer group posted revenue of $2.1 billion, an increase of 45 per cent from last year, while revenue from Compaq's Global Services unit dropped 2 per cent to $1.71 billion for the quarter, the company said.

Analysts currently expect Compaq to earn $1.49 a share for 2001, up from $1.08 per share for the current year, First Call/Thomson Financial said. Revenue is expected to grow to $48.1 billion in 2001.

On Tuesday, Compaq's stock closed down 70 cents a share or 2.53 per cent to $27 a share.